<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
HOLOGIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2902449
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
590 LINCOLN STREET, WALTHAM, MASSACHUSETTS 02154 (617) 890-2300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
S. DAVID ELLENBOGEN, CHAIRMAN OF THE BOARD
HOLOGIC, INC.
590 LINCOLN STREET
WALTHAM, MASSACHUSETTS 02154
(617) 890-2300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
LAWRENCE M. LEVY, ESQUIRE EDWIN L. MILLER, JR., ESQUIRE
BROWN, RUDNICK, FREED & GESMER TESTA, HURWITZ & THIBEAULT
ONE FINANCIAL CENTER 125 HIGH STREET
BOSTON, MASSACHUSETTS 02111 BOSTON, MASSACHUSETTS 02110
(617) 330-9000 (617) 248-7000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
1,380,000
Common Stock, $ .01 par value.... Shares $41.38 $57,104,400 $19,691.17
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Rights to Purchase Common Stock
(3)............................. -- -- -- --
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</TABLE>
(1) Includes up to 180,000 shares of Common Stock which may be purchased by
the Underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.
(3) Pursuant to a Rights Agreement entered into in 1992, one right (each a
"Right") is deemed to be delivered with each share of Common Stock issued
by the Company. The Rights currently are not separately transferable apart
from the Common Stock, nor are they exercisable until the occurrence of
certain events. Accordingly, no independent value has been attributed to
the Rights.
----------------
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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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 14, 1995
PROSPECTUS
1,200,000 Shares
[Logo of HOLOGIC, INC.]
Common Stock
-----------
All of the 1,200,000 shares of Common Stock offered hereby are being sold by
Hologic, Inc. ("Hologic" or the "Company"). The Company's Common Stock is
quoted on the Nasdaq National Market under the symbol "HOLX." On December 13,
1995, the last reported sale price for the Company's Common Stock on the Nasdaq
National Market was $39.25 per share. See "Price Range of Common Stock."
-----------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share........................ $ $ $
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Total (3)........................ $ $ $
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</TABLE>
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(1) The Company and, in the event that the Underwriters' over-allotment option
is exercised, the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $350,000.
(3) The Company and the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to an additional 180,000 shares of Common
Stock solely to cover over-allotments, if any. If the Underwriters exercise
this option in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Stockholders will
be $ , $ , $ and $ , respectively. See
"Underwriting."
-----------
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them, and subject to the right of the Underwriters to reject orders
in whole or in part. It is expected that delivery of the shares of Common Stock
will be made in New York, New York, on or about , 1996.
-----------
Needham & Company, Inc.
Tucker Anthony
Incorporated
Adams, Harkness & Hill, Inc.
The date of this Prospectus is , 1996.
<PAGE>
[LOGO of HOLOGIC, INC.]
QDR 4500A ACCLAIM
[DESCRIPTION OF GRAPHIC MATERIAL]
A picture of the Company's QDR 4500A ACCLAIM bone densitometer, including a
patient lying on her back on the table top of the system, and a technician
sitting in front of a computer console mounted on a separate table operating the
equipment.
Hologic introduced its fourth generation, clinically-oriented QDR 4500A
ACCLAIM DXA bone densitometer in fiscal 1995. Pioneered by the Company, DXA
systems have become the predominant means of evaluating low bone density
before fractures occur and monitoring changes in a patient's bone density in
response to therapy. The ACCLAIM series of bone densitometers offers rapid
scanning and high resolution imaging using the latest available fan beam and
high density, solid-state, multi-detector array technology.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
included or incorporated by reference in this Prospectus. Except as otherwise
indicated, all information contained in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised. References to "Common
Stock" include "Rights" issuable pursuant to that certain Rights Agreement
entered into in 1992 providing for the delivery of a Right along with each
share of Common Stock issued by the Company.
THE COMPANY
Hologic, Inc. ("Hologic" or the "Company") is a leading international
developer, manufacturer and marketer of X-ray bone densitometers which
precisely measure bone density for use in the diagnosis and monitoring of
metabolic bone diseases such as osteoporosis. The Company pioneered the use of
dual-energy X-ray absorptiometry ("DXA") to measure bone density, introducing
the first DXA bone densitometer in 1987. Since this introduction, DXA systems
have become the standard for measuring bone density. In 1995, the Company
introduced its fourth generation of DXA bone densitometers, the clinically
oriented QDRt 4500 ACCLAIMe product line.
Osteoporosis is a condition characterized by reduced bone density that leads
to an increased risk of fracture, which occurs primarily in post-menopausal
women. It is estimated to afflict more than 25 million people in the United
States, at an annual cost of over $10 billion, and approximately 200 million
people worldwide. Because bone loss occurs without symptoms, osteoporosis often
goes unrecognized until after a patient suffers one or more fractures,
frequently of the spine or hip. The measurement of bone density can be used to
assess early post-menopausal bone loss as an indication for initiating
preventive therapies, and to monitor bone density during treatment for
osteoporosis.
The Company believes that the clinical market for osteoporosis diagnostic and
monitoring products is expanding due to the recent development and introduction
of new drug therapies to treat osteoporosis, the more widespread and increased
reimbursement for bone density examinations, the aging of the population, and
an increased focus on women's health issues and preventive medical practices.
All of these factors have led to an increased awareness by women and primary
care providers, such as gynecologists and family physicians, that osteoporosis
is a treatable disease and that measurement of bone density is an integral
component of diagnosis and monitoring of this disease.
In September 1995, the United States Food and Drug Administration (the "FDA")
approved the drug Fosamaxt, developed by Merck & Co., Inc. ("Merck"), for the
treatment of established osteoporosis in post-menopausal women. Fosamax is also
approved in at least 18 countries in addition to the United States. In clinical
trials, Fosamax was shown to increase bone density at the potential
osteoporotic fracture sites of the spine and hip, and to reduce the incidence
of fractures, as compared to patients receiving placebo, without any
significant adverse side effects. Following the approval of Fosamax, Merck has
launched an extensive educational campaign regarding the treatment of
osteoporosis and the use of DXA and other techniques to diagnose and monitor
bone loss and the effects of drug therapies.
To further address the growing clinical market for the early diagnosis and
monitoring of bone loss, the Company is developing products that it believes
will complement its DXA product line. In December 1994, the Company acquired
the ultrasound bone analyzer business of Walker Sonix, Inc. ("Walker Sonix").
The Company is developing an enhanced ultrasound bone analyzer, the Saharae,
which it intends to introduce in clinical test sites in the United States and
certain international markets during fiscal 1996. The Company believes that
ultrasound systems could represent a relatively low cost, compact, easy-to-use,
non-X-ray based, screening technique to assist in the initial diagnosis of
osteoporosis. In September 1994, the Company began a joint development effort
with Serex, Inc. ("Serex") to develop a diagnostic strip test to detect
biochemical markers that indicate the rate of a patient's bone loss. The strip
test is being designed to provide a physician with a real-time means of
measuring a patient's biochemical response to osteoporosis therapies and
compliance with those therapies, as a complement to periodic bone density
measurements. The Company and Serex have also recently entered into an
agreement in principle with a leading pharmaceutical company to develop and
market an over-the-counter version of the strip test. In addition, the Company
is expanding its United States and international distribution capabilities.
Hologic, Inc. was incorporated as a Massachusetts corporation in October 1985
and was reincorporated in Delaware in March 1990. The Company's principal
offices are located at 590 Lincoln Street, Waltham, Massachusetts 02154, and
its telephone number is (617) 890-2300. As used in this Prospectus, the term
"Company" refers to Hologic, Inc. and its subsidiaries.
3
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company........... 1,200,000 shares
Common Stock to be outstanding after the
Offering..................................... 5,379,635 shares(1)(2)
Use of Proceeds............................... For general corporate
purposes, including working
capital, new product
development, sales and
marketing expansion, and
potential acquisitions. See
"Use of Proceeds."
Nasdaq National Market Symbol................. HOLX
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED (3)
---------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
--------------- ------------- ------------- -------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues................ $17,057 $26,270 $24,848 $38,484 $43,400
Income (loss) before
income taxes(4)(5)(6).. 1,015 2,102 (2,075) 4,330 2,520
Net income
(loss)(4)(5)(6)........ 701 1,479 (1,775) 2,995 1,870
Net income (loss) per
common and common
equivalent share:
Primary(4)(5)(6)...... $ 0.17 $ 0.37 $ (0.45) $ 0.71 $ 0.43
Fully diluted(6)...... $ 0.69 $ 0.41
Weighted average number
of common and common
equivalent shares
outstanding:
Primary............... 4,049 4,050 3,930 4,195 4,376
Fully diluted......... 4,342 4,575
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------
ACTUAL AS ADJUSTED (7)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................................... $19,370 $63,530
Total liabilities....................................... 11,190 11,190
Total assets............................................ 33,862 78,022
Stockholders' equity.................................... 22,672 66,832
</TABLE>
- --------
(1) Based on the number of shares of Common Stock outstanding as of December
11, 1995. Excludes (i) 859,548 shares of Common Stock issuable upon
exercise of options outstanding under the Company's stock plans at December
11, 1995 and (ii) certain other contingent obligations for the Company to
issue additional shares of Common Stock. See "Capitalization" and Notes 5
and 8 of Notes to Consolidated Financial Statements.
(2) The Board of Directors of the Company has declared a two-for-one stock
split in the form of a stock dividend to be paid in March 1996, subject to
stockholder approval of an increase in the number of authorized shares of
Common Stock at the Company's Annual Meeting of Stockholders scheduled for
February 27, 1996. See "Description of Capital Stock."
(3) The Company changed its fiscal year end from September 30 to the last
Saturday in September effective with the fiscal year ended September 25,
1993.
(4) Includes litigation expenses of $1.2 million before income taxes ($800,000
after income taxes or $0.20 per share) primarily relating to certain patent
litigation involving technology which the Company no longer owns.
(5) Reflects a restructuring charge of $900,000 (before and after income taxes
or $0.23 per share) relating to the reorganization of the Company's
European operations.
(6) Reflects litigation expenses of $2.5 million before income taxes ($1.8
million after income taxes or $0.41 per share) primarily relating to
certain patent litigation. A definitive agreement was reached by the
Company and the other party to this litigation in November 1995 settling
all outstanding disputes. See "Business--Patents and Proprietary Rights."
(7) Adjusted to reflect the sale by the Company of 1,200,000 shares of Common
Stock offered hereby, at an assumed offering price of $39.25 per share (the
closing price on December 13, 1995), and the application of the estimated
net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
The Hologic logo is a service mark of the Company. QDR and QDR 1000 are
registered trademarks of the Company. QDR 1000W, QDR 1000plus, QDR 2000, QDR
2000plus, QDR 4500, QDR 4500A, QDR 4500SL, QDR 4500W, QDR 4500C, ACCLAIM, UBA
575+ and Sahara are trademarks of the Company. The trademarks Scanora and
Walker Sonix are licensed by the Company. This Prospectus also contains
trademarks of other companies.
4
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus or incorporated
herein by reference, the following risk factors should be considered carefully
in evaluating the Company and its business before purchasing the shares
offered in this Prospectus.
DEPENDENCE OF PRODUCT SALES ON AVAILABILITY AND ACCEPTANCE OF NEW DRUG
THERAPIES FOR OSTEOPOROSIS
The Company believes that it is important for the continued growth of its
sales that the efficacy of new drug therapies to treat osteoporosis and other
bone disorders be demonstrated, that broadened regulatory approval of those
therapies be granted in the United States and elsewhere, and once approved,
that these new drug therapies gain acceptance. There can be no assurance that
any drug therapies under development or in clinical trials will prove to be
effective, obtain FDA approval or, once approved, gain acceptance. Fosamax and
certain other drug therapies were approved in 1995 by the FDA for the
treatment of osteoporosis and other bone disorders. The failure of one or more
of these therapies to gain wide acceptance, or the failure of new therapies to
be approved and gain acceptance, could have a material adverse effect on the
Company's business. See "Business--Background."
UNCERTAINTY OF HEALTH CARE REFORM
Health care reform and medical cost containment have received significant
attention in the United States and many foreign countries. Certain reform
proposals and cost containment measures could limit the use of the Company's
products, reduce reimbursement available for such use, or adversely affect the
use of new drug therapies to treat osteoporosis and other bone disorders. As a
result, such reforms or cost containment measures could materially and
adversely affect sales of the Company's products. Uncertainty in the medical
community regarding the nature and effect of proposed health care reforms and
cost containment measures may also have a material adverse effect on the
Company's business.
THIRD PARTY REIMBURSEMENT FOR BONE DENSITY EXAMINATIONS
Reimbursement for the use of DXA bone densitometers has been approved by
health care insurance systems in the United States and many foreign countries,
including Belgium, Brazil, Canada, Germany, Greece, Japan, South Korea, Spain
and Switzerland. In the United States, DXA examinations are paid for by many
private third party insurers. In addition, the Health Care Finance
Administration ("HCFA"), which establishes guidelines for the reimbursement of
health care providers treating Medicare and Medicaid patients, has recommended
reimbursement for DXA examinations. The actual reimbursement amounts provided
for DXA examinations is determined by the individual state Medicare carriers.
As of December 1995, several of the more populous states, including
California, Connecticut, New York, New Jersey and Pennsylvania, had no or only
partial reimbursement of DXA examinations. The Company believes that it is
important for the continued growth of sales of the Company's DXA bone
densitometers in the United States and internationally that reimbursement for
bone density examinations be retained and broadened. A reduction in
reimbursement levels could have a material adverse effect on the Company's
business. See "Business--Third Party Reimbursement."
DEVELOPING MARKETS; NEED TO BROADEN ACCEPTANCE OF THE COMPANY'S PRODUCTS
The Company's continued success will depend upon the acceptance and adoption
of newly introduced and emerging drug therapies to treat osteoporosis by the
broad market of primary care providers, such as gynecologists and family
physicians, and the Company's ability to broaden sales of its products to
these physician groups. In order to penetrate this market more effectively,
the Company has expanded its sales and marketing activities, including
increasing its sales force, advertising and participation in trade shows. In
addition, the Company has implemented various leasing programs, including a
program with a third party leasing company, to make its QDR 4500C ACCLAIM
system available to physicians on a fee-per-scan basis, which expires in June
1996. There can be no assurance that the Company will be successful in
obtaining broader market acceptance for its products as a result of these
activities and programs or otherwise. Failure of the Company to do so could
have a material adverse effect on its business.
5
<PAGE>
COMPETITION; NEW PRODUCTS AND TECHNOLOGICAL CHANGE
The markets for the Company's products are highly competitive and subject to
rapid technological change and evolving industry requirements and standards.
The Company believes that these trends will continue into the foreseeable
future. Many of the Company's current and potential competitors have
substantially greater resources than the Company. Several companies have
developed or are expected to develop DXA bone densitometry systems or other
products that measure or assess bone density or bone mineral status, which
compete or will compete with the Company's products. These other systems
include single photon absorptiometry, radiographic absorptiometry,
quantitative computed tomography, ultrasound and biochemical markers. Although
the Company believes that DXA technology is more precise than competing
technologies and is capable of scanning a broader range of sites, certain
competing technologies have cost or other advantages which may limit the
Company's DXA market. The Company's products may also compete with sales of
used and refurbished systems. Furthermore, no assurance can be given that
continuing improvements in current or new technologies will not make them
technically equivalent or superior to DXA technology in addition to providing
cost or other advantages. The Company's success will depend upon its ability
to enhance its existing products, and to develop new products to meet
regulatory and customer requirements and to achieve market acceptance. There
can be no assurance that the Company will be successful in introducing
products or product enhancements on a timely basis, if at all, that the
Company will be able to market these products and product enhancements once
developed, or that the Company otherwise will be able to compete effectively.
See "Business-- Competition."
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The Company's results of operations have and may continue to be subject to
significant quarterly variation. The results for a particular quarter may vary
due to a number of factors, including the overall state of health care and
cost containment efforts, the development status and demand for drug therapies
to treat osteoporosis, economic conditions in the Company's markets, the
timing of orders, the timing of expenditures in anticipation of future sales,
the mix of products sold by the Company, the introduction of new products and
product enhancements by the Company or its competitors, and pricing and other
competitive conditions. The Company also believes that its sales in Europe may
be seasonal, with reduced orders in the summer months reflecting summer
vacation schedules. Customers may also cancel or reschedule shipments and
production difficulties could delay shipments. Any of these factors also could
materially adversely affect the Company's annual results of operations.
NO ASSURANCE THAT NEW PRODUCTS WILL RECEIVE FDA OR FOREIGN REGULATORY
CLEARANCES
Medical devices cannot be marketed in the United States without clearance or
approval by the FDA. Medical devices sold in the United States must also be
manufactured in compliance with FDA Good Manufacturing Practices, which
regulate the design, manufacture, packaging, storage and installation of
medical devices. Moreover, medical devices are required to comply with FDA
regulations relating to investigational research, labeling and post-market
reporting. States may also regulate the manufacture, sale and use of medical
devices, particularly those that employ X-ray technology. The Company's
products are also subject to approval and regulation by certain foreign
regulatory and safety agencies. The process of obtaining clearances and
approvals can be costly and time-consuming. Moreover, any approvals or
clearances, once obtained, can be withdrawn or modified. The Company has
obtained all necessary FDA marketing clearances for its DXA bone densitometers
under the less stringent 510(k) marketing clearance procedure and is presently
awaiting regulatory clearance of its QDR 4500 ACCLAIM product line in Japan.
The Company believes that its ultrasound products and over-the-counter
biochemical marker strip test may require the more stringent and time
consuming FDA premarket approval to be marketed in the United States. Delay or
inability to obtain any necessary United States or foreign clearances or
approvals could have a material adverse effect on the Company's business. See
"Business--Regulation."
RELIANCE ON SEREX FOR THE DEVELOPMENT OF BIOCHEMICAL MARKER STRIP TEST
The Company has entered into a research and development agreement with Serex
to develop biochemical marker strip tests to monitor bone resorption. Serex is
a relatively small company with limited resources and
6
<PAGE>
limited operating history. There can be no assurance that Serex will be able
to meet its obligations under this agreement or otherwise be successful in
developing the strip test on a timely basis or within budget, if at all. Any
such failure on the part of Serex could have a material adverse effect on the
Company's future prospects.
RELIANCE ON FOREIGN SALES
In fiscal 1995, foreign sales accounted for approximately 75% of the
Company's product sales. The Company maintains sales and service offices in
Belgium, France and Spain. The expenses and sales of these offices are
denominated in local currencies. The Company anticipates that foreign sales
and foreign denominated sales will continue to account for a significant
portion of the Company's total sales, which will result in a significant
portion of the Company's revenues being subject to risks associated with
foreign sales, including risks of exchange rate fluctuations, United States
and foreign regulatory requirements and policy changes, political and economic
instability, difficulties in accounts receivable collection, difficulties in
managing distributors or representatives and seasonality of sales. The Company
has hedged its foreign currency exposure by borrowing funds in local European
currencies to pay the expenses of its foreign offices. There can be no
assurance that these hedging activities will be successful, or that exchange
rate fluctuations or other risks associated with international sales and
operations will not have a material adverse effect on the Company's business.
See "Business--Marketing and Sales" and Note 11 of Notes to Consolidated
Financial Statements.
DEPENDENCE ON THIRD PARTY DISTRIBUTORS; SIGNIFICANT CUSTOMER
For its sales and service activities outside of the United States, Canada
and certain European countries, the Company is primarily dependent upon third
party distributors. In fiscal 1995, the Company's sales to its exclusive
Japanese distributor, Toyo Medic Co., Ltd. ("Toyo Medic"), accounted for 20%
of product sales. There can be no assurance that Toyo Medic or any of the
Company's other distributors will continue to provide sales and services for
the Company at acceptable levels, if at all, or that the Company would be able
to replace any distributors on terms as advantageous to the Company should any
of its existing arrangements terminate. Further, there can be no assurance
that the Company will be able to make arrangements with additional
distributors to access new markets. Material adverse changes in the
relationship between the Company and its distributors, including the loss of
Toyo Medic as a distributor or an adverse change in the relationship between
the Company and Toyo Medic, or the failure of the Company to enter into
advantageous arrangements with distributors in new markets, could have a
material adverse effect on the Company's business. See "Business--Marketing
and Sales."
UNCERTAINTY OF PATENT AND PROPRIETARY RIGHTS PROTECTION
The Company relies upon trade secrets and patents to protect its technology.
The Company has obtained ten patents, licensed five patents and has pending 17
patent applications in the United States relating to its DXA technology, and
has obtained three patents, licensed four patents and has pending two patent
applications in the United States relating to its ultrasound technology. The
Company has obtained or applied for corresponding patents and patent
applications for certain of these patents and patent applications in certain
foreign countries. There can be no assurance that any of the Company's patent
applications will be granted or that any patent or patent application will
provide significant protection for the Company's products and technology.
Moreover, there can be no assurance that foreign intellectual property laws
will protect the Company's intellectual property rights. In the absence of
significant patent protection, the Company may be vulnerable to competitors
who attempt to copy the Company's products, processes or technology.
The Company has been involved in extensive patent litigation with Lunar
Corporation ("Lunar"), with each party claiming that the other is infringing
certain patents held by the other. This litigation was settled by agreement
dated November 22, 1995. The agreement provides for certain royalties to be
paid by each party to the other for future sales of products using certain
defined technologies. The Company does not believe that amounts to be paid by
either party under this arrangement will be material. The agreement also
provides that
7
<PAGE>
neither party will engage the other party in patent litigation relating to
these technologies for a period of ten years following the date of the
agreement, regardless of the infringement claimed and regardless of whether
the technology in question currently exists or is developed or acquired by the
other party in the future. There can be no assurance that Lunar will not use
the Company's technology during this ten-year period in a manner that would
materially and adversely affect the Company's business. See "Business--Patents
and Proprietary Rights."
ATTRACTION AND RETENTION OF KEY PERSONNEL
The future success of the Company will depend in large part on the continued
services of its executive officers, as well as the Company's ability to
attract and retain other highly qualified and well-trained managerial and
technical personnel. There may be only a limited number of persons with the
requisite skills to serve in these positions and it may become increasingly
difficult for the Company to hire such personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
able to attract and retain personnel necessary for the development of its
business. Mr. Ellenbogen and Dr. Stein, the Chief Executive Officer and Senior
Vice President, respectively, of the Company, also serve in similar positions
at Vivid Technologies, Inc. ("Vivid"). Under a management agreement between
the Company and Vivid, the Company has agreed to provide management services
to Vivid, including the part-time assistance of Mr. Ellenbogen and Dr. Stein.
During fiscal 1995, Mr. Ellenbogen and Dr. Stein have typically devoted up to
approximately 16 and eight hours per week, respectively, to Vivid. See
"Management--Vivid Technologies, Inc."
PRODUCT LIABILITY
The Company's business involves the risk of product liability claims
inherent to the medical device business. The Company currently maintains
product liability insurance with an aggregate coverage limit of $6.0 million
per year, subject to certain deductibles and exclusions. There can be no
assurance that this insurance will be sufficient to protect the Company from
product liability claims, or that product liability insurance will be
available to the Company at a reasonable cost, if at all, in the future.
LITIGATION
In January 1995, B.V. Optische Industrie de Oude Delft ("Oldelft") filed
suit in the United States District Court for the Southern District of New York
against the Company and the University of Rochester seeking unspecified treble
damages, attorneys' fees and costs relating to technology no longer owned by
the Company. The Company believes that it has meritorious defenses and has
sought a dismissal of Oldelft's claims. There can be no assurance that the
Company will prevail in having these claims dismissed, and if not dismissed,
that the Company will prevail in the defense of these claims. Even if such
defense is successful, litigation can be expensive and time consuming and can
materially adversely affect the Company's business. See "Business--Legal
Proceedings."
ANTI-TAKEOVER PROVISIONS; MANAGEMENT CONTROL
The Company's Certificate of Incorporation and By-laws include certain
provisions that may have the effect of discouraging or preventing a change in
control of the Company. In addition, the Company made a rights distribution in
December 1992 that could also have the effect of discouraging or preventing a
change in control of the Company. These provisions could limit the price that
stockholders of the Company might receive in the future for shares of the
Common Stock. See "Description of Capital Stock."
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock may be highly volatile. Such factors as
quarterly fluctuations in the Company's results of operations, the
announcement of technological innovations or new products by the Company or
its competitors, and general conditions in the industry in which the Company
competes may have a significant impact on the market price of the Common
Stock.
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,200,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$44,160,000, assuming a public offering price of $39.25 per share (the closing
price of the Common Stock on December 13, 1995) and after deduction of the
estimated underwriting discounts and commissions and estimated offering
expenses payable by the Company.
The Company expects to use the net proceeds for working capital and general
corporate purposes, including new product development, and sales and marketing
expansion. The Company is undertaking the offering in part because it believes
that the availability of adequate financial resources is a substantial
competitive factor. The Company may use a portion of the net proceeds for
strategic acquisitions of businesses, products or technologies complementary
to the Company's business. The Company does not have any commitments to make
any such material acquisition. Pending such uses, the Company plans to invest
the net proceeds of this offering in short-term, interest-bearing investment-
grade securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "HOLX." The following table sets forth, for the periods indicated, the
high and low sales prices per share of Common Stock, as reported by the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 24, 1994
First Quarter................................................ $ 5 $ 3 1/2
Second Quarter............................................... 7 3/8 3 3/8
Third Quarter................................................ 14 6 3/8
Fourth Quarter............................................... 18 9 3/4
FISCAL YEAR ENDED SEPTEMBER 30, 1995
First Quarter................................................ 18 1/8 12 1/4
Second Quarter............................................... 18 3/4 13 1/4
Third Quarter................................................ 17 3/8 9
Fourth Quarter............................................... 25 1/8 15 3/8
FISCAL YEAR ENDING SEPTEMBER 28, 1996
First Quarter (through December 13).......................... 45 1/2 20 3/4
</TABLE>
The last reported sale price of the Common Stock on the Nasdaq National
Market on December 13, 1995 was $39.25 per share. As of December 11, 1995,
there were approximately 223 holders of record of the Company's Common Stock.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock
and does not plan to pay any cash dividends in the foreseeable future. The
Company's current policy is to retain all of its earnings to finance future
growth.
9
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1995 and as adjusted to reflect the sale of 1,200,000 shares of
Common Stock offered hereby by the Company and the application of the
estimated net proceeds therefrom, assuming a public offering price of $39.25
per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company. This table
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity(1)(2):
Preferred Stock, $.01 par value, 1,622,685 shares
authorized; no shares issued........................... $ -- $ --
Common Stock, $.01 par value, 10,000,000 shares
authorized; 4,122,100 shares issued and outstanding;
5,322,100 shares issued and outstanding, as adjusted... 41 53
Capital in excess of par value.......................... 15,355 59,503
Retained earnings....................................... 7,421 7,421
Cumulative translation adjustment....................... (145) (145)
------- -------
Total stockholders' equity............................ $22,672 $66,832
======= =======
</TABLE>
- --------
(1) Excludes (i) 884,683 shares of Common Stock issuable upon exercise of
options outstanding under the Company's stock plans at September 30, 1995
and (ii) certain other contingent obligations for the Company to issue
additional shares of Common Stock. See Notes 5 and 8 of Notes to
Consolidated Financial Statements.
(2) The Board of Directors of the Company has declared a two-for-one stock
split in the form of a stock dividend to be paid in March 1996, subject to
stockholder approval of an increase in the number of authorized shares of
Common Stock at the Company's Annual Meeting of Stockholders scheduled for
February 27, 1996. See "Description of Capital Stock."
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data of
the Company and is qualified by the more detailed Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. The
consolidated statement of operations data for the fiscal years ended September
25, 1993, September 24, 1994 and September 30, 1995 and the consolidated
balance sheet data as of September 24, 1994 and September 30, 1995 have been
derived from Consolidated Financial Statements, which statements have been
audited by Arthur Andersen LLP, independent public accountants, and are
included elsewhere in this Prospectus. The consolidated statement of
operations data for the fiscal years ended September 30, 1991 and 1992 and the
consolidated balance sheet data as of September 30, 1991 and 1992 and
September 25, 1993 have been derived from the Company's consolidated financial
statements, which statements have been audited by Arthur Andersen LLP and are
not included in this Prospectus. This data should be read in conjunction with
the Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
--------------- ------------- ------------- -------------
CONSOLIDATED STATEMENT OF 1991 1992 1993 1994 1995
OPERATIONS DATA: ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales........... $15,258 $26,197 $24,140 $37,056 $41,130
Other revenue........... 1,799 73 708 1,428 2,270
------- ------- ------- ------- -------
17,057 26,270 24,848 38,484 43,400
Costs and expenses:
Cost of product sales... 8,464 13,469 13,729 20,865 22,091
Research and develop-
ment................... 3,559 3,608 3,182 3,442 4,301
Selling and marketing... 2,373 4,692 5,472 5,893 7,835
General and administra-
tive................... 1,249 3,132 3,501 4,189 4,461
Litigation ex-
penses(1)(2)........... 1,190 -- -- -- 2,534
Restructuring costs(3).. -- -- 900 -- --
------- ------- ------- ------- -------
16,835 24,901 26,784 34,389 41,222
------- ------- ------- ------- -------
Income (loss) from opera-
tions.................... 222 1,369 (1,936) 4,095 2,178
Interest income........... 793 502 300 316 610
Other income (expense).... -- 231 (439) (81) (268)
------- ------- ------- ------- -------
Income (loss) before in-
come taxes............... 1,015 2,102 (2,075) 4,330 2,520
Provision (benefit) for
income taxes............. 314 623 (300) 1,335 650
------- ------- ------- ------- -------
Net income (loss)......... $ 701 $ 1,479 $(1,775) $ 2,995 $ 1,870
======= ======= ======= ======= =======
Net income (loss) per com-
mon and common equivalent
share:
Primary............... $ 0.17 $ 0.37 $ (0.45) $ 0.71 $ 0.43
======= ======= ======= ======= =======
Fully diluted......... $ 0.69 $ 0.41
======= =======
Weighted average number of
common and common equiva-
lent shares outstanding:
Primary............... 4,049 4,050 3,930 4,195 4,376
======= ======= ======= ======= =======
Fully diluted......... 4,342 4,575
======= =======
<CAPTION>
SEPTEMBER 30, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
--------------- ------------- ------------- -------------
CONSOLIDATED BALANCE SHEET 1991 1992 1993 1994 1995
DATA: ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Working capital........... $15,503 $16,427 $14,540 $17,688 $19,370
Total liabilities......... 3,135 4,578 5,854 8,625 11,190
Total assets.............. 19,809 22,695 22,166 28,497 33,862
Stockholders' equity...... $16,674 $18,117 $16,312 $19,872 $22,672
</TABLE>
- --------
(1) The fiscal 1991 litigation expenses of $1.2 million, or $0.20 per share,
relate primarily to certain patent litigation involving technology which
the Company no longer owns.
(2) The fiscal 1995 litigation expenses of $2.5 million, or $0.41 per share,
relate primarily to certain patent litigation. A definitive agreement was
reached by the Company and the other party to this litigation in November
1995 settling all outstanding disputes. See "Business--Patents and
Proprietary Rights."
(3) The fiscal 1993 restructuring charge of $900,000, or $0.23 per share,
relates to the reorganization of the Company's European operations.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Since inception, the Company has experienced generally increasing annual
sales as interest in bone diseases, such as osteoporosis, has grown, as new
drug therapies have become available in the United States and other countries
to treat these diseases and as the use of DXA systems to measure bone density
has become more widespread. The Company's revenues increased 75% to $43.4
million in 1995 from $24.8 million in 1993. During 1995, the Company's net
income was adversely impacted by litigation costs of $2.5 million, or $0.41
per share, a substantial portion of which was incurred in connection with the
Company's litigation with Lunar, which was settled in November 1995. In fiscal
1993, the Company's sales dropped slightly from fiscal 1992 as a result of
certain recessionary economic trends in Europe and a significant reduction of
United States sales due to uncertainty over the direction of proposed
healthcare reforms. In fiscal 1994 and 1995, the economic climate in Europe
steadily improved and the uncertainty over United States government reform of
the healthcare system abated. In addition, the Company was successful in its
efforts to develop new international markets in Latin America and the Pacific
Rim.
The Company commenced operations in April 1986 and was primarily engaged in
product development through the end of fiscal 1987. The Company shipped the
first QDR 1000 for clinical testing in June 1987 and began commercial
shipments of the system in October 1987 upon receipt of FDA marketing
clearance. The Company introduced a bone densitometer capable of assessing the
bone density of the entire body in 1989, introduced the first bone
densitometer capable of taking supine lateral measurements of the spine in
1991, and introduced its fourth generation clinically-oriented QDR 4500
ACCLAIM series of bone densitometers at the annual meeting of the Radiological
Society of North America in November 1994. The Company's shipments of its
high-end QDR 4500A ACCLAIM began in January 1995 and of its entire ACCLAIM
product line began in the third quarter of fiscal 1995. In the fourth quarter
of fiscal 1995, ACCLAIM sales represented approximately 70% of the Company's
total DXA sales. The Company achieved a slightly higher gross margin on this
product line because of higher selling prices and lower overall manufacturing
costs than the older DXA line.
The Company believes that the two major drivers of the growth in demand for
its bone densitometers are (i) the availability of new and effective drug
therapies to treat and prevent bone diseases, including osteoporosis, and (ii)
the availability of reimbursement to healthcare providers for bone density
measurements of patients. On September 29, 1995, the FDA cleared for marketing
Merck's new bisphosphonate, Fosamax, for treatment of established osteoporosis
in post-menopausal women. The Health Care Finance Administration, the agency
which administers Medicare, increased the recommended reimbursement rate for
DXA tests to a national average of $124, effective January 1, 1995, from $68,
the original recommended reimbursement rate which went into effect in April
1994.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
revenues represented by items as shown in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Product sales........... 97.1% 96.3% 94.8%
Other revenue........... 2.9 3.7 5.2
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Cost of product sales... 55.3 54.2 50.9
Research and
development............ 12.8 8.9 9.9
Selling and marketing... 22.0 15.3 18.1
General and
administrative......... 14.1 10.9 10.3
Litigation expenses..... -- -- 5.8
Restructuring costs..... 3.6 -- --
----- ----- -----
107.8 89.3 95.0
----- ----- -----
Income (loss) from
operations............. (7.8) 10.7 5.0
Interest income......... 1.2 0.7 1.4
Other expense........... (1.7) (0.2) (0.6)
----- ----- -----
Income (loss) before
income taxes............. (8.3) 11.2 5.8
Provision (benefit) for
income taxes............. (1.2) 3.4 1.5
----- ----- -----
Net income (loss)......... (7.1%) 7.8% 4.3%
===== ===== =====
</TABLE>
FISCAL YEARS ENDED SEPTEMBER 30, 1995, SEPTEMBER 24, 1994 AND SEPTEMBER 25,
1993
REVENUES. Total revenues were $43.4 million in fiscal 1995, $38.5 million in
fiscal 1994 and $24.8 million in fiscal 1993. The increase in total revenues
of 13% in fiscal 1995 compared to fiscal 1994 was primarily due to the
increase in the total number of DXA product shipments in both the Company's
domestic and international markets, particularly to Europe where product sales
increased 30% over the prior year. During fiscal 1995, there was also a shift
in product sales mix to the Company's new line of bone densitometers, the
ACCLAIM series, which the Company began shipping in January 1995. The new
ACCLAIM products have higher average selling prices than the comparable DXA
bone densitometers which they replace. For the current year, sales of the
ACCLAIM product accounted for over 42% of product sales. The increase in total
revenues in fiscal 1994 compared to 1993 was primarily due to the increase in
the total number of DXA product shipments in both the Company's domestic and
international markets, particularly Japan where the Company's distributor
accounted for 28% of product sales in fiscal 1994. During fiscal 1994, there
was also a shift in product sales mix from fiscal 1993, with an increased
percentage of sales being derived from the higher-priced QDR 2000plus and QDR
2000 systems, and an increase in sales of two X-ray products which the Company
began to sell as a distributor, primarily in Europe.
Other revenues consist of royalty revenues from the Company's licensing of
its technology to a related party and revenue relating to medical data
management services provided to pharmaceutical companies to assist in the
collection and monitoring of clinical trial data. In fiscal 1995, other
revenue increased 59% to $2.3 million from $1.4 million in fiscal 1994,
primarily due to an increase in revenue for medical data management services.
In fiscal 1994, other revenue increased 101% from $710,000 in fiscal 1993
primarily due to an increase in royalty revenues and, to a lesser extent, an
increase in revenue relating to medical data management services. See
"Business--Customers" and "Business--Patents and Proprietary Rights."
13
<PAGE>
In fiscal 1995, approximately 37% of product sales were generated in Europe,
29% in Asia, 25% in the United States and 9% in other international markets.
In fiscal 1994, approximately 38% of product sales were generated in Asia, 31%
in Europe, 26% in the United States and 5% in other international markets. In
fiscal 1993, approximately 51% of product sales were generated in Europe, 26%
in the United States, 17% in Asia and 6% in other international markets. The
Company expects that foreign sales in the current fiscal year will continue to
account for a substantial portion of product sales. See "Risk Factors --
Reliance on Foreign Sales."
COSTS AND EXPENSES. The cost of product sales decreased as a percentage of
product sales to 54% in fiscal 1995 from 56% in fiscal 1994 and from 57% in
fiscal 1993. In fiscal 1995, these costs decreased as a percentage of product
sales primarily due to the Company initiating shipments of its new family of
DXA bone densitometers, the ACCLAIM series, and a volume increase in the
number of DXA systems sold resulting in certain manufacturing efficiencies.
The Company began selling the ACCLAIM product in the second quarter of fiscal
1995 and has recognized higher gross margins than on the older DXA product
line from higher average selling prices and lower labor and overhead-related
manufacturing costs. In fiscal 1994, the cost of product sales decreased as a
percentage of product sales primarily due to the volume increase in the number
of DXA systems sold and the associated manufacturing efficiencies. These gross
margin improvements were offset somewhat by increased sales of X-ray systems,
which are distributed but not manufactured by the Company in Europe, resulting
in an overall gross margin percentage that is less than what is earned on the
DXA product line.
Research and development expenses increased 25% to $4.3 million (10% of
total revenues) in fiscal 1995 from $3.4 million (9% of total revenues) in
fiscal 1994 primarily due to the addition of engineering personnel and outside
consultants working on the development of new products and the funding of
Serex to develop a biochemical marker strip test. In fiscal 1994, research and
development expenses increased from $3.2 million (13% of total revenues) in
fiscal 1993 primarily due to the addition of engineering personnel working on
the development of new products and due to higher prototype material costs
associated with the Company's new fourth-generation QDR 4500 ACCLAIM bone
densitometers.
Selling and marketing expenses increased 33% to $7.8 million (19% of product
sales) in fiscal 1995 from $5.9 million (16% of product sales) in fiscal 1994.
The increase in fiscal 1995 expenses was primarily due to an increase in sales
personnel and related expenses, marketing and promotional costs incurred in
connection with the introduction of the QDR 4500 ACCLAIM product and increased
sales commissions based on the higher sales volume. In fiscal 1994, selling
and marketing expenses increased 8% from $5.5 million (23% of product sales)
in fiscal 1993. The increase in fiscal 1994 from 1993 was primarily due to
increased sales commissions based on the higher sales volume, especially in
North America and Latin America where the Company sells directly to end-user
customers. In addition, the Company incurred additional costs in connection
with its initiation of a formal new business development effort, which has
resulted in the Company's recent product acquisitions and strategic alliances.
The decrease in expenses as a percentage of product sales in fiscal 1994 was
due to the significant increase in sales volume to distributors which
generally do not receive commissions.
General and administrative expenses increased to $4.5 million (10% of total
revenues) in fiscal 1995 from $4.2 million (11% of total revenues) in fiscal
1994 and $3.5 million (14% of total revenues) in fiscal 1993. The increase in
fiscal 1995 was primarily due to increased head count and other compensation-
related expenditures. The increase in fiscal 1994 when compared to fiscal 1993
was primarily due to increases in accounts receivable reserves, which reflects
the increase in accounts receivable, and an increase in employee incentive
programs. These increases were offset in part by a decrease of general and
administrative expenses in Europe as part of the reorganization begun in the
fourth quarter of fiscal 1993.
Litigation expenses incurred in fiscal 1995 were in connection with the
Company's disputes with Lunar and Oldelft. Legal expenses in connection with
the patent litigation with Lunar began in October 1994 and represent a
substantial portion of the total litigation expenses. In November 1995, a
definitive agreement that provides for the cross-licensing of certain patent
rights and a non-assertion agreement for all patents involving DXA and
ultrasound technologies for a period of ten years was reached by both
companies. See "Risk Factors -- Litigation," "Business -- Patents and
Proprietary Rights" and "Business -- Legal Proceedings."
14
<PAGE>
In the fourth quarter of fiscal 1993, the Company recorded a restructuring
charge of $900,000. This nonrecurring charge covered the reorganization of its
European operations, including consolidation of the distribution and
administrative infrastructure, asset write-offs including receivables and
inventory, and a reduction of its European workforce. The charges from this
restructuring were a result of the weak European economy and the Company's
desire to reallocate its resources to expanding territories with greater
growth potential. At the end of fiscal 1994, the Company's reorganization was
complete and all restructuring charges had been incurred.
INTEREST INCOME. Interest income increased to $610,000 in fiscal 1995 from
$320,000 in fiscal 1994 as the Company earned a higher rate of return on a
slightly higher investment base than in the prior year and increased the
number of long-term receivables to Latin American customers. In fiscal 1994,
interest income increased from $300,000 in fiscal 1993 as the Company earned a
slightly higher rate of return on a slightly lower investment base than in the
preceding year.
OTHER EXPENSE. In fiscal 1995 and 1994, the Company incurred other expenses
of $270,000 and $80,000, respectively. These expenses were primarily
attributable to the interest costs on a line of credit established by the
Company in the third quarter of fiscal 1994 for use by the Company's European
subsidiaries to borrow funds in their local currencies to pay for all
intercompany sales, thereby reducing the foreign currency exposure on those
transactions.
In fiscal 1993, the Company recognized other expenses of $440,000 which
primarily represented foreign currency exchange losses, net of hedge
transactions, arising from the Company's United States dollar-denominated
sales to its three European subsidiaries. Approximately one-half of the losses
for the year were incurred in the first quarter, prior to the implementation
of the Company's program to purchase foreign currency forward contracts to
hedge its foreign currency exposure. In 1993, the United States dollar
strengthened significantly against the three foreign currencies (the French
franc, the Belgian franc and the Spanish peseta) in which the subsidiaries
conducted business causing the Company to recognize a transaction loss.
To the extent that foreign currency exchange rates fluctuate in the future,
the Company may be exposed to continued financial risk. Although the Company
has established a borrowing line denominated in the two foreign currencies
(the French franc and the Belgian franc) in which the subsidiaries currently
conduct business to minimize this risk, there can be no assurance that the
Company will be successful or can fully hedge its outstanding exposure. See
"Risk Factors -- Reliance on Foreign Sales."
PROVISION FOR INCOME TAXES. The Company's effective tax rate was 25.8% in
fiscal 1995 and 30.8% in fiscal 1994. In fiscal 1993, the Company had a
benefit for income taxes as a result of that year's loss. The Company's
effective tax rate is lower than the statutory tax rates due primarily to the
utilization of tax credits, the utilization of net operating losses in foreign
jurisdictions and tax benefits associated with the Company's foreign sales
corporation.
15
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited consolidated quarterly
financial information for the eight quarters ended September 30, 1995. In the
opinion of the Company's management, this information has been prepared on the
same basis as the Consolidated Financial Statements appearing elsewhere in the
Prospectus and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial results set forth
herein. Results of operations for any previous quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL 1994 QUARTER ENDED FISCAL 1995 QUARTER ENDED
--------------------------------------------- ---------------------------------------------
CONSOLIDATED STATEMENTS DECEMBER 25, MARCH 26, JUNE 25, SEPTEMBER 24, DECEMBER 24, MARCH 25, JUNE 24, SEPTEMBER 30,
OF OPERATIONS DATA: 1993 1994 1994 1994 1994 1995 1995 1995
---- ---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales.......... $7,483 $9,476 $10,573 $9,524 $ 9,783 $8,521 $10,804 $12,022
Other revenues......... 164 432 375 457 416 510 497 847
------ ------ ------- ------ ------- ------ ------- -------
7,647 9,908 10,948 9,981 10,199 9,031 11,301 12,869
Costs and Expenses:
Cost of product sales.. 4,109 5,343 5,855 5,558 5,343 4,893 5,670 6,185
Research and
development........... 783 845 928 886 968 1,109 1,015 1,209
Selling and marketing.. 1,427 1,341 1,356 1,769 1,822 1,712 2,112 2,189
General and
administrative........ 790 1,120 1,194 1,085 1,140 900 1,159 1,262
Litigation expenses.... -- -- -- -- 54 298 801 1,381
------ ------ ------- ------ ------- ------ ------- -------
7,109 8,649 9,333 9,298 9,327 8,912 10,757 12,226
------ ------ ------- ------ ------- ------ ------- -------
Income from operations.. 538 1,259 1,615 683 872 119 544 643
Other income (expense).. 64 16 126 29 32 95 73 142
------ ------ ------- ------ ------- ------ ------- -------
Income before income
taxes.................. 602 1,275 1,741 712 904 214 617 785
Provision for income
taxes.................. 190 400 545 200 260 60 130 200
------ ------ ------- ------ ------- ------ ------- -------
Net income.............. $ 412 $ 875 $ 1,196 $ 512 $ 644 $ 154 $ 487 $ 585
====== ====== ======= ====== ======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1994 QUARTER ENDED FISCAL 1995 QUARTER ENDED
--------------------------------------------- ---------------------------------------------
AS A PERCENTAGE OF TOTAL DECEMBER 25, MARCH 26, JUNE 25, SEPTEMBER 24, DECEMBER 24, MARCH 25, JUNE 24, SEPTEMBER 30,
REVENUES: 1993 1994 1994 1994 1994 1995 1995 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales.......... 97.9% 95.6% 96.6% 95.4% 95.9% 94.4% 95.6% 93.4%
Other revenues......... 2.1 4.4 3.4 4.6 4.1 5.6 4.4 6.6
----- ----- ----- ----- ----- ----- ----- -----
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Costs and Expenses:
Cost of product sales.. 53.7 54.0 53.5 55.7 52.4 54.1 50.1 48.1
Research and develop-
ment.................. 10.2 8.5 8.5 8.9 9.5 12.3 9.0 9.4
Selling and marketing.. 18.7 13.5 12.4 17.7 17.9 19.0 18.7 17.0
General and administra-
tive.................. 10.3 11.3 10.9 10.9 11.2 10.0 10.3 9.8
Litigation expenses.... -- -- -- -- 0.5 3.3 7.1 10.7
----- ----- ----- ----- ----- ----- ----- -----
92.9 87.3 85.3 93.2 91.5 98.7 95.2 95.0
----- ----- ----- ----- ----- ----- ----- -----
Income from operations.. 7.1 12.7 14.7 6.8 8.5 1.3 4.8 5.0
Other income (expense).. 0.8 0.2 1.1 0.3 0.3 1.0 0.6 1.1
----- ----- ----- ----- ----- ----- ----- -----
Income before income
taxes.................. 7.9 12.9 15.8 7.1 8.8 2.3 5.4 6.1
Provision for income
taxes.................. 2.5 4.1 4.9 2.0 2.5 0.6 1.1 1.6
----- ----- ----- ----- ----- ----- ----- -----
Net income.............. 5.4% 8.8% 10.9% 5.1% 6.3% 1.7% 4.3% 4.5%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
16
<PAGE>
The Company's results of operations have and may continue to be subject to
significant quarterly variation. The results for a particular quarter may vary
due to a number of factors, including the overall state of health care and
cost containment efforts, the development status and demand for drug therapies
to treat osteoporosis, economic conditions in the Company's markets, the
timing of orders, the timing of expenditures in anticipation of future sales,
the mix of products sold by the Company, the introduction of new products and
product enhancements by the Company or its competitors, and pricing and other
competitive conditions. The Company also believes that its sales in Europe may
be seasonal, with reduced orders in the summer months reflecting summer
vacation schedules. See "Risk Factors--Quarterly Fluctuations in Operating
Results."
REVENUES. The Company's revenues have increased generally in the quarters
presented above, reflecting increased market acceptance of the DXA systems and
a global strengthening of the bone densitometry market. The decrease in
revenues in the quarter ended September 24, 1994, generally reflected the
seasonal variation the Company has experienced in the summer months. In the
quarter ended September 30, 1995, the Company did not experience a slowdown in
revenues from seasonality due to the increased market activity from the
interest in a new drug therapy to treat osteoporosis and an increase in demand
for ACCLAIM, the Company's new product series. Also in the fourth quarter of
fiscal 1995, sales in the United States benefited from the anticipated FDA
approval of Fosamax. The decrease in revenues in the quarter ended March 25,
1995 was primarily due to the introduction of three models of the new ACCLAIM
product line, including the QDR 4500C clinical densitometer, in April 1995
which caused a delay in sales in the earlier quarter. The ACCLAIM product line
was introduced in December 1994 and shipments of the QDR 4500A, the high-end
system, began in January 1995. In the fourth quarter of fiscal 1995, the
ACCLAIM product line accounted for approximately 70% of the Company's DXA
product sales.
EXPENSES. The quarterly fluctuations in cost of product sales as a
percentage of net revenues were attributable to changing product mix,
variances in selling prices between countries and different distribution
channels, improved manufacturing efficiencies associated with increased
product volumes and, in the last two quarters of fiscal 1995, increased
selling prices and improved manufacturing efficiencies associated with
ACCLAIM, the Company's new product family.
Research and development expenses have generally increased through the
quarter ended September 30, 1995, reflecting the increased development efforts
for the ACCLAIM product line and, in fiscal 1995, development projects for a
dry ultrasound system and a strip-test utilizing a biochemical marker.
Selling, general and administrative expenses have generally increased over
the last eight quarters primarily due to increases in sales commissions,
marketing expenditures and personnel to support the Company's sales growth and
introduction of new products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations primarily through cash flows from
operations and the issuance of Common Stock.
At September 30, 1995, the Company's working capital was $19.4 million. At
such date, the Company had $9.9 million in cash, cash equivalents and short-
term investments. The current cash, cash equivalents and investments balance
increased approximately $540,000 from September 24, 1994 primarily due to an
increase in the Company's current liabilities, which were partially offset by
an increase in inventories and accounts receivable. The increase in current
liabilities, inventories and accounts receivable reflects the Company's
introduction of its new ACCLAIM family of bone densitometers and the increase
in sales activity. At September 30, 1995, one customer had accounts receivable
outstanding of approximately $2.2 million, which were current within their
payment terms. The Company finances certain sales to Latin America over a two
to three year time frame. At September 30, 1995, the Company had long-term
accounts receivable outstanding of approximately $800,000 relating to these
sales, which were included in other assets. Working capital increased by
approximately $1.7 million in fiscal 1995, primarily from the addition of net
income. In fiscal 1995, the Company purchased $800,000 of property and
equipment, primarily computers and other equipment associated with the hiring
of additional personnel.
The Company does not currently have any significant capital commitments and
believes that existing sources of liquidity, including the anticipated net
proceeds of the offering, funds expected to be generated from operations and a
$3.0 million credit line for use by its European subsidiaries, will provide
adequate cash to fund the Company's anticipated working capital and other cash
needs for the foreseeable future.
17
<PAGE>
BUSINESS
The Company is a leading international developer, manufacturer and marketer
of X-ray bone densitometers which precisely measure bone density for use in
the diagnosis and monitoring of metabolic bone diseases such as osteoporosis.
The Company pioneered the use of dual-energy X-ray absorptiometry ("DXA") to
measure bone density, introducing the first DXA bone densitometer in 1987.
Since this introduction, DXA systems have become the standard for measuring
bone density. In 1995, the Company introduced its fourth generation of DXA
bone densitometers, its clinically oriented QDR 4500 ACCLAIM product line.
To address the growing clinical market for the early diagnosis and
monitoring of osteoporosis, the Company is developing products that it
believes will complement its DXA product line. In December 1994, the Company
acquired the ultrasound bone analyzer business of Walker Sonix, Inc. The
Company is developing an enhanced ultrasound bone analyzer, the Sahara(TM),
which it intends to introduce in clinical test sites in the United States and
certain international markets during fiscal 1996. The Company believes that
ultrasound systems could represent a relatively low cost, compact, easy-to-
use, non-X-ray based, screening technique to assist in the initial diagnosis
of osteoporosis. In September 1994, the Company began a joint development
effort with Serex, Inc. to develop a diagnostic strip test to detect
biochemical markers that indicate the rate of a patient's bone loss. The strip
test is being designed to provide a physician with a real-time means of
measuring a patient's biochemical response to osteoporosis therapies and
compliance with those therapies, as a complement to periodic bone density
measurements. The Company and Serex have also recently entered into an
agreement in principle with a leading pharmaceutical company to develop and
market an over-the-counter version of the strip test.
BACKGROUND
OSTEOPOROSIS. Osteoporosis is a condition characterized by reduced bone
density that leads to an increased risk of fractures. Bone is a dynamic organ
that is maintained through a process referred to as remodeling in which old
bone is removed (resorption) and new bone is formed. In early adulthood, the
levels of bone resorption and bone formation are generally balanced, with the
quantity and distribution of bone throughout the body varying over time
depending on muscle mass, strength and use. When remodeling does not function
properly, and resorption exceeds formation, the result is a net loss of bone
mass and density, often causing diminished structural integrity of the
skeleton (particularly of the trabecular "spongy" bone) and an increased risk
of fracture.
According to the National Osteoporosis Foundation (the "NOF"), 25 million
Americans, 80% of whom are women, and approximately 200 million people
worldwide, suffer from osteoporosis. Osteoporosis typically develops silently
over a period of years, eventually progressing to a point where a fracture can
easily occur, causing pain and disability. The post-menopausal female
population has the highest incidence of osteoporosis and the highest rate of
morbidity (loss of quality of life) and mortality due to osteoporosis. The NOF
estimates that in the United States osteoporosis contributes to more than 1.3
million fractures annually, a majority of which were of the spine and hip, and
that related direct health care and indirect productivity costs in 1987 were
approximately $10 billion. Hip fractures lead to the most serious
consequences. According to the NOF, as many as one in every five hip fracture
patients dies from complications within a year after fracture, one in every
four requires long-term care and an even higher percentage of hip fracture
patients never return to an active and independent lifestyle.
Until recently, osteoporosis was thought to be an untreatable consequence of
aging. The Company believes that the recent development and introduction of
new drug therapies, the aging of the population, and an increased focus on
women's health issues and preventive medical practices has created a growing
awareness among patients and physicians that osteoporosis is treatable.
18
<PAGE>
THERAPIES. The Company believes that over 70 clinical studies are currently
in progress to assess the safety and effectiveness of new therapies to treat
osteoporosis. However, prior to 1995, there were only two approved drug
treatments for osteoporosis in the United States, hormone replacement therapy,
using estrogen and related hormones ("HRT"), and calcitonin, with the most
widely prescribed treatment being HRT. Patient concerns regarding
complications related to prolonged use of HRT have contributed to a low
compliance rate. Until recently, calcitonin was available only in an
injectable form, a delivery method that has contributed to low patient
compliance. Although HRT and calcitonin have generally been shown in clinical
trials to slow or stop the loss of bone mass, these therapies have not been
proven to restore bone mass.
On September 29, 1995, the FDA approved Merck's drug Fosamax for the
treatment of established osteoporosis in post-menopausal women. Fosamax is a
bisphosphonate that acts by coating the bone surface and inhibiting bone
resorption. Merck reports that in clinical studies of Fosamax conducted in
over 16 countries, post-menopausal female patients with established
osteoporosis who were treated with Fosamax gained an average of 7-10% bone
mass in the spine and 7-8% bone mass in the hip over a three-year period
compared to patients treated with placebo, and that Fosamax reduced the number
of new vertebral fractures (fractures of the spine) by approximately 48%
compared with placebo. Merck is conducting ongoing clinical trials to
determine the effectiveness of Fosamax in preventing osteoporosis. Fosamax is
also approved in at least 18 countries in addition to the United States.
Other therapies cleared by the FDA to treat osteoporosis in 1995 are a one-
tablet hormone replacement therapy, which combines estrogen and progestin,
developed by Wyeth-Ayerst Laboratories, and an intra-nasal formulation of
calcitonin developed by Sandoz. In addition, in November 1995, an FDA advisory
committee recommended that the FDA approve slow-release sodium fluoride for
the treatment of post-menopausal osteoporosis. Additional therapies undergoing
clinical trials for the prevention or treatment of osteoporosis include
bisphosphonates being developed by Proctor & Gamble (Rasidronate), Boehringer-
Mannheim (Ibandronate) and Sanofi (Tiludronate), and estrogen analogues or
anti-estrogens being developed by Eli Lilly (Raloxifene) and Pfizer
(Draloxifene).
In several European countries, Japan and other international markets, there
has been an earlier availability and greater acceptance of osteoporosis
therapies. Some of these therapies include estrogens, bisphosphonates,
calcitonins, vitamin D compounds and ipriflavone.
The timing of when and where new drugs will become commercially available,
if ever, is uncertain. However, the Company believes that there will be
broadened and new approvals of osteoporosis therapies for both treatment and
prevention which should positively impact the bone assessment market
worldwide. See "Risk Factors--Dependence of Product Sales on Availability and
Acceptance of New Drug Therapies for Osteoporosis."
DIAGNOSIS AND MONITORING OF OSTEOPOROSIS. There are a number of different
technologies that are available that can be used to assess bone mineral
status. The following table sets forth selected information regarding the
range of these technologies.
19
<PAGE>
COMPARISON OF BONE ASSESSMENT TECHNOLOGIES
<TABLE>
<CAPTION>
RADIATION
TECHNOLOGY SCAN SITE(S) PRECISION* DOSE FDA STATUS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dual Energy X-ray spine, hip, forearm (less than) 2-4 mR cleared
Absorptiometry and whole body 1-3%
(DXA)
- -----------------------------------------------------------------------------------------
Single Photon Absorptiometry forearm or heel 1-3% 5-10 mR cleared
(SPA)
- -----------------------------------------------------------------------------------------
Quantitative Computed spine or forearm 2-6% 200-1000 mR cleared
Tomography
(QCT)
- -----------------------------------------------------------------------------------------
Radiographic Absorptiometry hand 1-2% 5 mR cleared
(RA)
- -----------------------------------------------------------------------------------------
Ultrasound finger or heel 1-4% None not cleared
- -----------------------------------------------------------------------------------------
Biochemical Marker NA NA None cleared
(laboratory format)
- -----------------------------------------------------------------------------------------
</TABLE>
- --------
* Consistency of bone density measurements from test to test
(repeatability)
Since the introduction of the first DXA bone densitometer by the Company in
1987, dual energy X-ray absorptiometry has become the primary means of
measuring bone density. Prior to that introduction, the most widely used bone
density measuring technique for the hip and spine was dual photon
absorptiometry (DPA). DPA systems were not very precise and required
relatively long scanning times and the use of an expensive radioactive source
that required periodic replacement. In contrast, DXA systems have much higher
precision, require significantly shorter scanning times and do not require a
radioactive source. DXA systems require a low patient radiation exposure (less
than 1/10th of a conventional chest X-ray). The most advanced DXA systems can
be used to measure the bone density of the whole body, or any site, including
the most important fracture sites of the hip or spine. As a result of their
precision and versatility, DXA systems have become the predominant means of
evaluating low bone density before fractures occur and monitoring changes in a
patient's bone density in response to therapies.
Other bone assessment technologies include single photon absorptiometry
(SPA), radiographic absorptiometry (RA), quantitative computed tomography
(QCT), quantitative ultrasound and biochemical markers.
Single photon absorptiometry was introduced in the 1960s and represents an
effective method of measuring bone density at a peripheral site of the
skeleton (forearm or heel), although it cannot be used to measure the most
important fracture sites of the spine or hip. SPA systems also have the added
inconvenience of requiring the patient to place the site being scanned in
water or other tissue-equivalent media to achieve precision. SPA, however,
does represent a relatively inexpensive and valuable tool in the diagnosis of
osteoporosis with reasonable precision and low radiation exposure.
Quantitative computed tomography was introduced in the mid 1970s and can
measure bone density by using a CT scanner to determine both the patient's
bone density and bone distribution in three dimensions. QCT, however, has
remained limited in clinical use because of its relatively high radiation dose
and the high cost of CT scanner equipment.
Radiographic absorptiometry, also introduced in the 1970s, measures bone
density from two X-ray images (radiographs) of the hand placed alongside a
calibration device using a conventional X-ray machine. The
20
<PAGE>
radiographs are sent to a central processing laboratory where a computer
measures the density of the bone. The precision of this technique is
comparable to SPA measurements. An advantage of this system is that it does
not require any additional capital investment, as traditional X-ray equipment
can be used to obtain the radiographs. The technique, however, cannot be used
to measure and monitor the hip or spine. Also, because the radiograph must be
sent to a laboratory for testing, it does not provide a real-time assessment
of bone density, and, if the test is positive, a follow-up consultation is
required. The Company believes that RA will be useful in rural areas where
there may not be a sufficient concentration of patients to justify a capital
investment in DXA bone density measuring equipment.
Ultrasound has long been used in medical testing. However, the use of
ultrasound for the detection of osteoporosis was not commercially introduced
until recently, and then only in certain foreign countries. Ultrasound
measurement has concentrated mainly on the heel, which is comprised primarily
of trabecular bone, as a measuring site. Initial clinical trials of ultrasound
systems have indicated a significant association of low ultrasonic bone
measurements of the heel and the risk of fracture. The latest developments in
hardware and software, resulting in enhanced precision and ease of use, are
currently making ultrasound techniques an option for the diagnosis of
osteoporosis. Major advantages of ultrasound examination are the complete
absence of radiation and the small size and low cost of the equipment.
Ultrasound devices do not use X-rays in making their measurements and
therefore do not require X-ray licensing or registered operators. However,
because ultrasound bone measurements currently are not as precise as DXA and
other measurements, they are less reliable for continued monitoring of small
changes in bone density or for assessing the response to therapies. In
addition, they are generally limited to measurements at peripheral sites, not
the more important spine or hip fracture sites. Accordingly, the Company
believes that the most likely use for ultrasound techniques currently employed
and under development by the Company and others will be for initial screening
for osteoporosis and not for continued monitoring of changes in bone density
or the response to therapies.
Biochemical markers are substances that are produced within the body that
correlate directly or indirectly to disease or bodily function. A number of
biochemical markers have been discovered that can be used to measure the rate
of bone resorption or formation. These measurements, while not measuring bone
density, can provide a means to assess quickly (within approximately three
months) the effectiveness of treatment and patient compliance with therapies
for osteoporosis. A baseline and subsequent bone density tests (as frequently
as annually) must be used in conjunction with biochemical marker measurements
to assess fully the bone density of the patient. Because biochemical markers
cannot be used independently to diagnose osteoporosis or risk of fracture, or
to monitor a patient's changes in bone density as a result of therapy or
otherwise, the Company believes that biochemical marker tests, including those
being developed by the Company, will complement and not replace densitometry.
MARKET. The Company believes that the clinical market for osteoporosis
diagnostic and monitoring products is expanding due to the recent development
and introduction of new drug therapies to treat osteoporosis, the more
widespread and increased reimbursement for bone density examinations, the
aging of the population, and an increased focus on women's health issues and
preventive medical practices. All of these factors have led to an increased
awareness by women and primary care providers, such as gynecologists and
family physicians, that osteoporosis is a treatable disease and that
measurement of bone density is an integral component of diagnosis and
monitoring of this disease.
Upon obtaining FDA approval for Fosamax in September 1995, Merck launched an
extensive educational campaign to increase patient and physician awareness
that osteoporosis is a treatable disease. In connection with this effort,
Merck is promoting the use of DXA and other techniques to diagnose and monitor
osteoporosis and the effects of drug therapies. The Company believes that this
comprehensive Merck program will further accelerate the growth of the bone
densitometer and related markets. Currently, Fosamax is only approved for use
by patients with established osteoporosis. However, Merck and other drug
companies are conducting ongoing clinical trials to establish the efficacy of
drug therapies to prevent osteoporosis in high risk patients. Such approval
would increase the need for patient testing and monitoring at an earlier age,
before a patient is afflicted with osteoporosis.
21
<PAGE>
In the United States, the Health Care Finance Administration, which
establishes guidelines for the reimbursement of health care providers treating
Medicare and Medicaid patients, provided validation for DXA bone densitometry
examinations as a clinically useful procedure by recommending the
reimbursement for DXA bone evaluations at the rate of $68 per scan effective
April 1994. Effective January 1995, HCFA furthered the clinical use of DXA
evaluations by increasing the recommended reimbursement rate to $124. In part
as a result of the reimbursement policy recommendations implemented by HCFA,
bone density examinations are paid for by many private third party insurers in
the United States. See "Risk Factors--Third Party Reimbursement for Bone
Density Examinations" and "Business--Third Party Reimbursement."
With the recent increase in reimbursement levels in the United States, and
the FDA approval of Fosamax and other drug therapies, the Company believes
that the United States market for bone densitometers and other methods of bone
mineral assessment will expand from hospitals, large clinics, research
institutions and imaging and women's centers, to the larger potential market
of primary care providers, including gynecologists and family physicians.
In several European countries, Japan and other international markets, there
has been a greater availability or acceptance of osteoporosis therapies and an
earlier adoption of reimbursement for bone densitometry exams. Countries in
which reimbursement for the use of X-ray bone densitometers has been approved
include Belgium, Brazil, Canada, Germany, Greece, Japan, South Korea, Spain
and Switzerland. In addition, the Japanese government has been actively
supporting an educational program to promote public awareness of osteoporosis
as a treatable disease. In Latin American countries such as Argentina, Brazil
and Chile, and in Pacific Rim countries, such as Australia, The Peoples
Republic of China, South Korea and Taiwan, there is a growing use of
osteoporosis therapies and an expanding market for osteoporosis diagnostic and
monitoring equipment.
HOLOGIC'S STRATEGY
The Company's goal is (i) to become the leading fully-integrated supplier of
technologically advanced, innovative and clinically valuable diagnostic
systems and tests that address the growing market for osteoporosis prevention
and treatment, and (ii) to diversify into other medical device markets which
it believes will be complementary to its current business. Key elements of
this strategy are as follows:
MAINTAIN AND ENHANCE DXA TECHNOLOGICAL LEADERSHIP. The Company has been a
pioneer in the development of DXA bone densitometers. Since commercially
introducing the first DXA bone densitometer in 1987, the Company introduced a
bone densitometer capable of assessing the bone density of the entire body in
1989, introduced the first bone densitometer capable of taking supine lateral
measurements of the spine in 1991 and introduced its fourth generation
clinically-oriented QDR 4500 ACCLAIM series of bone densitometers in 1995. The
ACCLAIM series integrates the Company's most advanced X-ray technology into a
compact package that facilitates installation in a standard examination room.
The Company believes that because of their technological features, its DXA
systems have been and continue to be the most widely used bone densitometers
for clinical studies involving the emerging drug therapies for osteoporosis.
The Company intends to continue to enhance and expand upon its core technical
expertise to develop increasingly efficient and cost-effective DXA bone
densitometer solutions.
EXPAND RANGE OF COMPLEMENTARY BONE DIAGNOSTIC AND MONITORING PRODUCTS. The
Company believes that a significant market exists for relatively low-cost
products that assess bone density, employ technologies that do not use X-rays
or other ionizing radiation, and may be used in a doctor's office. In order to
address this market, the Company is pursuing the development and acquisition
of products that use ultrasound and biochemical markers to assess bone mineral
status. Recent milestones achieved by the Company in connection with this
pursuit include the following:
. In December 1994, the Company acquired the Walker Sonix ultrasound bone
analyzer business.
. In September 1995, the Company introduced a prototype of the Sahara, an
internally developed advanced ultrasound bone analyzer that does not
require the use of water, at the American Society of Bone Mineral
Research.
22
<PAGE>
. In September 1994, the Company began a joint development effort with
Serex to develop a low-cost biochemical marker strip test.
. In December 1995, the Company and Serex further entered into an agreement
in principle with a major pharmaceutical company to develop an over-the-
counter version of the biochemical marker strip test.
The Company believes that if it is able to develop these products successfully
it will be in a position to offer a full range of diagnostic and monitoring
products for the growing osteoporosis market. The Company also plans to pursue
other product development and market opportunities in the area of bone
assessment that the Company identifies as promising.
EXPAND UNITED STATES DISTRIBUTION. The Company believes that the continued
development of its distribution network in the United States will be an
important factor in its continued success. The Company has developed an
experienced 11 person direct sales force covering the United States and plans
to enhance further its distribution capabilities in the United States through
a combination of an expansion of its sales force and strategic alliances with
companies with established distribution channels in the various market
segments for the Company's products.
CONTINUED INTERNATIONAL EXPANSION. International sales have accounted for
approximately 75% of the Company's sales in fiscal 1995, with such sales being
made predominantly to countries in Western Europe and Japan. In fiscal 1995,
the Company increased its efforts to expand its market penetration into new
markets in Latin America, including Argentina, Brazil and Chile, and along the
Pacific Rim, including Australia, The Peoples Republic of China, South Korea
and Taiwan. The Company intends to continue to seek to expand sales in these
and other less-developed territories.
DIVERSIFICATION INTO COMPLEMENTARY MARKETS. The Company is seeking to
leverage its medical device development, manufacturing and distribution
expertise to expand, through acquisition or strategic alliances, into
complementary markets. Such markets could include other diagnostic or imaging
markets, or other women's health care markets.
There can be no assurance that the Company will be able to implement
successfully any of its strategies on a timely basis, if at all, or if
successfully implemented, that any of these strategies will enable the Company
to maintain or enhance its growth. See "Risk Factors."
BONE ASSESSMENT PRODUCTS
The Company's products include a family of DXA bone densitometers which are
used for the precise measurement of bone density to assist physicians in the
diagnosis and monitoring of metabolic bone diseases such as osteoporosis.
Since commercially introducing the first DXA bone densitometer in 1987, the
Company introduced its first bone densitometer capable of assessing the bone
density of the entire body in 1989, introduced the first bone densitometer
capable of taking lateral measurements of the spine in 1991, and, in 1995,
introduced its new QDR 4500 ACCLAIM fourth generation series of bone
densitometers, which integrates the Company's most advanced X-ray technology
into a compact package that facilitates installation in a standard examination
room. The United States list prices for the Company's DXA bone densitometers
range from approximately $55,000 to $165,000 per system.
23
<PAGE>
The Company believes that a significant market may exist for relatively low-
cost products that assess bone mineral status, employ technologies that do not
use ionizing radiation and may be used in a doctor's office. In order to
address this market, the Company has acquired or is developing products that
use ultrasound or measure biochemical markers to assist in the assessment of
bone mineral status.
The following table sets forth certain information regarding the range of
the Company's bone assessment products, including certain products under
development.
PRODUCT EXAMINATION SITE FEATURES
- -------------------------------------------------------------------------------
DXA BONE
DENSITOMETERS
- -------------------------------------------------------------------------------
. Lumbar spine . Fan beam
(back-to-front . High resolution images
(PA)) . Automatic Internal Reference
QDR 4500A ACCLAIM . Lumbar spine System
(side-to-side . Automated analysis software with
(supine/lateral)) compare capability to a
. Hip patient's prior examinations
. Forearm . Advanced lateral analysis
(optional) software
. Whole body . Software for integration of
patient data into clinical and
research protocols
. Precision: (less than)1%
. Scan Time: 10 seconds to 3
minutes
- -------------------------------------------------------------------------------
. Lumbar spine (PA) . Fan beam
. Lumbar spine . High resolution images
(supine/lateral) . Automatic Internal Reference
QDR 4500SL ACCLAIM . Hip System
. Forearm . Automated analysis software with
(optional) compare capability to a
patient's prior examinations
. Advanced lateral analysis
software
. Software for integration of
patient data into clinical and
research protocols
. Precision: (less than)1%
. Scan Time: 10 seconds to 2
minutes
- -------------------------------------------------------------------------------
. Lumbar spine (PA) . Fan beam
. Hip . High resolution images
QDR 4500W ACCLAIM . Forearm . Automatic Internal Reference
(optional) System
. Whole Body . Automated analysis software with
compare capability to a
patient's prior examinations
. Software for integration of
patient data into clinical and
research protocols
. Precision: (less than)1%
. Scan Time: 15 seconds to 6
minutes
- -------------------------------------------------------------------------------
. Lumbar spine (PA) . Fan beam
QDR 4500C ACCLAIM . Hip . High resolution images
. Forearm . Automatic Internal Reference
(optional) System
. Automated analysis software with
compare capability to a
patient's prior examinations
. Software for integration of
patient data into clinical and
research protocols
. Precision: (less than)1%
. Scan Time: 15 to 30 seconds
- -------------------------------------------------------------------------------
. Lumbar spine (PA) . Pencil beam
. Hip . High resolution images
QDR 1000plus . Forearm . Automatic Internal Reference
(optional) System
. Automated analysis software with
compare capability to a
patient's prior examinations
. Software for integration of
patient data into clinical and
research protocols
. Precision: (less than)1%
. Scan Time: 2 to 7.2 minutes
24
<PAGE>
PRODUCT EXAMINATION SITE FEATURES
- -------------------------------------------------------------------------------
QUANTITATIVE
ULTRASOUND
- -------------------------------------------------------------------------------
. Heel . Water immersion of the heel
. Weight (25 lbs.)
WALKER SONIX UBA . Scan time of 5 to 6 minutes
575+ . Multi-point scanning
. Bi-directional measurements
. High resolution electronics
. External personal computer
required
- -------------------------------------------------------------------------------
. Heel . Dry operation
SAHARA . Compact and portable (14 lbs.)
(under development) . Single button operation
. Scan time of less than one
minute
. Bi-directional measurements
. Integrated high resolution
electronics (no external
personal computer required)
BIOCHEMICAL MARKERS
- -------------------------------------------------------------------------------
. Urine sample . Measurement of bone resorption
SEREX STRIP TEST biochemical markers
(under development) . Easy to use strip test
. Real time results during patient
visit
. Over-the-counter version also
under development
- -------------------------------------------------------------------------------
QDR X-RAY BONE DENSITOMETERS. Since the Company's first commercial shipment
of a DXA system in October 1987, the Company has sold more than 2,000 DXA
systems. The Company believes that its systems' performance advantages and
their early adoption by leading clinical investigators have led to their
market acceptance. The Company's DXA systems have been purchased for multiple-
site studies sponsored by the pharmaceutical companies and by the United
States government for evaluation of the incidence and treatment of
osteoporosis. In addition, pharmaceutical companies have promoted the purchase
of the systems for use by physicians to assist in the diagnosis and treatment
of osteoporosis.
Advantages of the Company's DXA systems include high precision (consistency
from test to test), low patient radiation exposure equivalent to 1/10th of a
conventional chest X-ray, a relatively fast scanning time, low operating cost,
no radioactive source and the ability to measure bone density of the most
important fracture sites, the spine and hip. Studies conducted by the Company
and independent investigators have demonstrated that the systems can detect a
change in spine bone density with a precision error of less than 1%.
All the Company's DXA systems employ the Company's patented Automatic
Internal Reference System, which continuously calibrates each patient's bone
density measurement to a known standard. This system virtually eliminates
errors that might result from manual calibration and saves operators the time-
consuming task of calibrating several times a day. The system automatically
compensates for drift in the X-ray system, detectors or other electronic
components which ensures long-term measurement stability.
Each of the Company's DXA systems contains an X-ray source mounted beneath
the patient, who is positioned lying on her back. The X-ray source generates
alternating high and low energy pulses in a thin beam that passes through the
Company's patented Automatic Internal Reference System and then through the
patient to an X-ray detector mounted above the patient. Controlled by a
computer, the X-ray source and detector are moved in tandem across the
patient. When the X-ray beam is detected, it contains information about the X-
ray absorbing characteristics of both the patient and the calibration
materials in the Automatic Internal Reference System at each of the two levels
of radiation. The system converts this information into a digital format which
is processed and analyzed by a computer and displayed on a high-resolution
color monitor, both of which are incorporated into the system.
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The Company has invested substantial resources in developing operating and
applications software for its systems. The software includes calibration
software, automated scan and analysis programs for each scan site, a patient
data base manager that archives all raw data for later retrieval and analysis
and allows the operator to review the current image with an earlier image of
the same patient.
Initial DXA systems developed by the Company employed a single narrow pencil
beam detected by one receptor. In 1991, the Company introduced the first bone
densitometer employing a high density fan shaped X-ray beam that is detected
by an array of receptors. This configuration enables the system to obtain
better quality images with improved spatial resolution, significantly faster
scanning time and higher patient throughput compared to single-beam systems.
Moreover, for standard spine and hip scans, fan beam technology can reduce
scan time by a factor of more than 25 compared to older single-beam scanning
systems.
The Company developed this fan beam technology to perform lateral (side-to-
side) scans of the lower spine, in addition to the posterior-anterior (back-
to-front) measurements performed by the Company's pencil beam systems. The
earliest and most dramatic loss of bone density in the spine occurs primarily
in the spine's soft (trabecular) bone, which is positioned directly behind the
hard (cortical) bone when taking back-to-front measurements. This results in
bone density measurements that average the density of the soft and hard bone
and tends to mask changes in the soft bone. A lateral scan permits the imaging
and measurement of the spine's soft bone with only limited interference from
hard bone. In addition, a lateral scan reduces the interference caused by
abnormal accumulation of bone and calcium deposits in and around the spine.
Numerous scientific articles have established lateral bone densitometry,
using supine patient positioning, as a highly precise and more diagnostically
sensitive way to measure the spine than conventional posterior-anterior
examinations. Lateral densitometry also eliminates scan artifacts such as
aortic calcification or degenerative disease of the spinal processes that can
distort conventional posterior-anterior measurements.
In November 1994, the Company introduced the QDR 4500A ACCLAIM at the annual
meeting of the Radiological Society of North America and in January 1995
obtained FDA clearance to sell the system in the United States. As of December
11, 1995, regulatory approval to sell the system in Japan was pending. See
"Business--Regulation."
The Company's QDR 4500 ACCLAIM series of bone densitometers offers rapid
scanning and high resolution imaging using the latest available fan beam and
high density, solid-state multi-detector array technology. In addition, the
QDR 4500 ACCLAIM series is built in modular configurations that allow
customers to add new features and capabilities, while protecting their
investment in the equipment and patient data.
An important feature of the QDR 4500A and QDR 4500SL is their ability to
perform lateral (side-to-side) scans of the lower spine, without turning the
patient on her side, in addition to the posterior-anterior (back-to-front)
measurements. The QDR 4500A and QDR 4500SL ACCLAIM are capable of producing
high quality images of the spine, lateral spine, hip and other skeletal sites.
The ACCLAIM's scan arm allows for multiple scan views without patient
repositioning. Using the QDR 4500A or the QDR 4500SL, high-quality lateral
images of the entire spine can now be obtained in as little as ten seconds.
The ACCLAIM systems are designed to require less floor space than any other
bone densitometer capable of taking hip and spine measurements. The special
tabletop design and motorized scanner C-arm allow the QDR 4500C and QDR 4500SL
to be installed in a standard 8ft x 8ft examination room (the QDR 4500W and
QDR 4500A require an 8ft x 10ft room). Installation requirements for any of
the ACCLAIM bone densitometers are minimal and normally do not require special
electrical, structural or lead-shielding preparation. In addition to their
small size, the QDR 4500 series offers virtually silent operation.
The ACCLAIM series has replaced the Company's QDR 1500, QDR 2000 and QDR
2000plus products. The Company has retained its QDR 1000plus system as a low-
price offering. The QDR 1000plus employs the Company's older pencil beam
technology. In the fourth quarter of fiscal 1995, the ACCLAIM series accounted
for approximately 70% of DXA sales.
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ULTRASOUND. In December 1994, the Company acquired the ultrasound bone
analyzer business of Walker Sonix. Walker Sonix had developed an ultrasound
product line to assess bone mineral status of the heel. The location of the
heel facilitates easy coupling of the ultrasound transducers at a site with a
relatively low amount of overlying soft tissue. The heel is also made up of
predominantly trabecular bone which tends to be more metabolically active. The
Walker Sonix ultrasound devices measure two parameters, Broadbased Ultrasound
Attention (BUA) and Speed of Sound (SOS) through a water medium to
characterize bone mineral status. The use of water as a medium, which is a
characteristic of other ultrasound bone analyzers, requires the patient to
place her foot in water. The use of water requires cumbersome plumbing and
cleaning mechanisms to be incorporated in the system.
The Company is developing internally an enhanced dry ultrasound bone
analyzer, called "Sahara" that will not require the use of water. The Company
believes that this "dry" technology will offer further operator convenience by
the elimination of the water handling required between each patient. The
elimination of the use of water has also enabled the Company to reduce the
size and weight of the device. In September 1995, the Company introduced a
prototype of the Sahara at the American Society of Bone Mineral Research and
plans to begin clinical trials of the Sahara in the United States and selected
foreign countries, and to commence international sales of the system in fiscal
1996. Commercial introduction of the system in the United States is dependent
upon FDA approval. The Company believes that this approval process may take as
long as two to three years. There can be no assurance that the Company will be
able to obtain FDA approval for the Sahara on a timely basis, if at all. See
"Risk Factors--No Assurance that New Products Will Receive FDA or Foreign
Regulatory Clearance," "--New Products and Technological Change" and
"Business--Regulation."
Recent studies have suggested that ultrasound provides good separation of
fracture populations from reference groups and suggests that this method is a
promising screening tool for evaluating a patient's fracture risk. However,
ultrasound does not allow for direct assessment of important hip and spine
fracture sites, has undocumented ability to follow the effects of therapy and
has less precision (reproducibility of results) compared to DXA measurements.
Accordingly, the Company believes that ultrasound systems will be used
predominantly as a low cost initial screening or diagnostic tool and not as a
patient monitoring tool.
BIOCHEMICAL MARKERS. In September 1994, the Company entered into a joint
development agreement with Serex to develop a simple strip test for use by
physicians to monitor the levels of a patient's biochemical markers that
indicate the rate of bone resorption. In December 1995, the Company and Serex
expanded the scope of this development effort by entering into an agreement in
principle with a major pharmaceutical company to develop an over-the-counter
version of this strip test. Although biochemical markers cannot measure bone
density, the Company believes that biochemical markers may be useful as a tool
to determine if therapy is effective. This is accomplished by comparing the
baseline level of the marker with the value obtained from a serial measurement
performed only two or three months following the start of therapy. This same
technique may be useful to evaluate patient compliance with a prescribed
therapy.
Traditionally, biochemical markers of bone were performed using high
pressure liquid chromatography ("HPLC") methods conducted in a research
laboratory. HPLC procedures are complex, labor intensive requiring a highly
trained technician, relatively slow, subject to high variability and
expensive. For these reasons, biochemical markers of bone using HPLC methods
have not been used for routine clinical testing. Recently, several
immunodiagnostic tests that are antibody-based have been developed as
biochemical markers of bone remodeling. Immunodiagnostic tests may be
performed in a variety of technical formats. The format that has been
introduced by several companies is the microtitre plate system, which is used
for many different types of in-vitro diagnostic tests and is normally
performed in a reference laboratory.
Serex has developed a proprietary and patented technology that enables
complex immuno-chemistry assays to be performed in a strip test format that
the Company believes is well-suited for testing directly in the physician's
office or the home to provide a real-time assessment of bone resorption. In
September 1994, the Company purchased a minority interest in Serex and entered
into a development and license agreement with
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Serex to develop a urine-based bone resorption test deliverable in a
diagnostic strip test format. The Company believes that other applications for
biochemical markers of bone as well as new markers are likely to be developed
in the future, and under its agreement with Serex, the Company retains the
first right to develop and license such tests. There can be no assurance that
Serex will be able to develop effective strip tests, either for physician or
over-the-counter use, on a timely basis, if at all, that once developed, any
strip test will be approved or cleared for sale in the United States or other
jurisdictions, or that once cleared or approved for sale any strip test will
be commercially successful. See "Risk Factors--No Assurance that New Products
Will Receive FDA or Foreign Regulatory Clearance," "--Competition; New
Products and Technological Change--Reliance on Serex for the Development of
Biochemical Marker Strip Test" and "Business--Regulation."
OTHER PRODUCTS; SCANORA
In order to take advantage of its European sales force and associated
distribution capability, in May 1993, the Company entered into distribution
agreement with Soredex, S.A. ("Soredex"), a division of Orion Corporation of
Helsinki, Finland, to distribute Scanora, a specialized system for taking X-
ray images of the maxillo-facial anatomy (teeth, jaw and other facial
structures).
The Scanora system supports more than 1,000 different image modes, including
pre-surgical planning of dental implants, reconstructive surgery and temporal
mandibular joint repair. This system provides significantly improved images of
the maxillo-facial anatomy compared to other techniques available in the
market, such as panoramic X-rays or computed tomography. Dental implant
procedures have experienced significant growth in Europe over the past five
years.
Under the agreement, the Company is the exclusive distributor of Scanora
systems in Western Europe, the Middle East and Africa, excluding South Africa
and Namibia. In addition, the Company has non-exclusive distribution rights in
several Eastern European countries. The agreement with Soredex provides for
the Company to purchase a minimum number of systems in each contract year. In
the event that the Company does not achieve the minimum levels set forth under
this agreement, Soredex has the option to terminate the distribution
agreement. The Company has met its minimum purchase requirements in each year
of the contract. The agreement expires in May 1996, subject to the rights of
each party to pursue an extension under conditions to be agreed upon at such
time. There can be no assurance that the Company and Soredex will agree to an
extension of the distribution agreement on favorable terms, if at all.
CUSTOMERS
The Company's DXA customers include many pharmaceutical companies active in
the field of bone mineral metabolism, such as Ciba-Geigy, Eli Lilly, Merck,
Pfizer, Proctor & Gamble, Rhone-Poulenc/Rorer, Sandoz, Sanofi Research and
SmithKline. The Company believes that because of their technological features,
its DXA systems have been and continue to be the most widely used bone
densitometers for clinical studies involving the emerging drug therapies for
osteoporosis. The Company has a group of eight employees who provide data
collection and quality assurance services to such customers. Initial clinical
evaluation sites for the Company's DXA systems included leading medical and
research institutions, such as the Mayo Clinic, the Massachusetts General
Hospital and the University of California at San Francisco in the United
States; the University of Lyon and Guy's Hospital in Europe; and Kobe
University in Japan. These institutions, along with many other leading medical
institutions, continue to be users of the Company's DXA systems.
The clinical demand for the Company's DXA bone densitometers is growing as a
result of the increased worldwide focus on women's health problems and the
availability of new osteoporosis therapies entering the market. More than 50%
of the Company's new sales of DXA systems have shifted to the clinical segment
of the market which includes radiologists, endocrinologists and
rheumatologists. The Company expects a further shift in the market for bone
densitometers to primary care physicians, including gynecologists and family
physicians, in response to the development of new drug therapies for
osteoporosis and the growing awareness of osteoporosis as a treatable disease.
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In fiscal 1995, the Company's sales to its Japanese distributor, Toyo Medic,
accounted for 20% of product sales. The loss of Toyo Medic as a customer of
the Company or an adverse change in the relationship between the Company and
Toyo Medic could have a material adverse affect on the Company's business. See
"Risk Factors--Reliance on Third Party Distributors; Significant Customer."
MARKETING AND SALES
In the United States, the Company sells its DXA systems primarily through
its direct sales force. As of November 30, 1995, the Company had 11 employees
engaged in sales in the United States. In order to penetrate this market more
effectively, the Company has expanded its direct marketing activities,
including additions to its sales force, and has implemented various leasing
programs, including a program with a third party leasing company to make its
QDR 4500C ACCLAIM system available to physicians on a fee-per-scan basis. The
Company believes that the continued development of its distribution network in
the United States will be as important to its continuing success as its
product offerings. To meet the growing demand for its products, the Company
plans to enhance further its distribution capabilities in the United States
through a combination of an expansion of its sales force and strategic
alliances with companies with established distribution channels in the various
market segments for the Company's products.
The Company sells its DXA and Scanora systems in international markets
through independent distributors, as well as a direct sales force in France,
the Benelux countries, Spain and Portugal. As of November 30, 1995, the
Company had six employees engaged in sales in Europe.
The Company distributes its products in Japan through Toyo Medic, which has
been the Company's exclusive distributor in Japan since April 1988. The
agreement requires Toyo Medic to purchase certain minimum quantities and to
provide technical and warranty support to its customers.
In certain other territories outside the United States, the Company sells
its DXA systems through independent distributors, all of whom offer technical
support. Employees of these distributors and sales representatives have
undergone product and technical training related to the Company's products.
The Company has increased its efforts to expand its market penetration into
Latin America, including Argentina, Brazil and Chile, and into Pacific Rim
countries other than Japan, including Australia, the Peoples Republic of
China, South Korea and Taiwan, by working with local sales representatives and
distributors or entering into strategic marketing alliances in those
territories. The Company believes that with time, Eastern Europe may present a
significant opportunity for growth and also is seeking to expand its presence
in the area.
In fiscal 1995, foreign sales accounted for approximately 75% of the
Company's product sales. The Company believes that the relatively high level
of foreign sales reflects, in part, a more advanced regulatory status for drug
therapies for osteoporosis in certain foreign countries than in the United
States. Additionally, the large percentage of foreign sales in Japan in fiscal
1994 reflect a government initiative in Japan to provide wide-spread screening
for women's health problems such as osteoporosis and the Company's efforts to
develop new foreign markets. The Company's foreign sales are subject to risks
generally associated with foreign sales, including United States and foreign
regulatory approval requirements and policy changes. The relative strength of
the United States dollar in relation to foreign currencies may also adversely
affect the Company's sales to foreign countries. The Company also believes
that its sales to Europe may be seasonal, with reduced orders in the summer
months reflecting summer vacation schedules. International sales will also be
affected by government approval of new drug therapies, changes in local health
care policies regarding reimbursement and the strength of promotional efforts
by its distributors. See "Risk Factors--Reliance on Foreign Sales,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 11 of Notes to Consolidated Financial Statements.
COMPETITION
The bone assessment market is highly competitive and characterized by
continual change and improvement in technology, and multiple technologies that
have been or are under development. Some of the companies in this industry
have significantly greater manufacturing, marketing and financial resources
than the Company. See "Risk Factors--Competition; New Products and
Technological Change" and "Business--Background."
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Four companies, Lunar, Norland Medical Systems, Aloka and Hitachi have
developed DXA systems to measure bone density which compete with the Company's
systems. The Company believes that competition in the field of DXA bone
densitometry is based upon their price, precision, speed of measurement,
patient radiation dose, cost and ease of operation, product versatility,
product reliability and quality of service. The Company believes that it
competes effectively with respect to these criteria. The Company believes that
its DXA systems will also compete with other X-ray based modalities, including
a radiographic absorptiometry product developed by CompuMed which has been
licensed to Merck. The Company's DXA systems also compete with specially-
equipped CT scanners and may compete with used and refurbished DXA systems.
See "Business--Background" for a discussion of the technical advantages and
disadvantages of these other systems.
Several companies, including Igea, McCue Ultrasonics, Lunar, Myriad
Ultrasound, Osteometer and Osteo-Sciences have developed ultrasound systems to
assess bone mineral status. Some of these companies have had substantially
more experience than the Company in developing and marketing their systems.
The Company believes that competition in the field of ultrasound systems is
based on price, precision, speed of measurement, cost and ease of operation,
product versatility, product reliability and quality of service. The Company
believes that advantages of its Sahara ultrasound bone analyzer system under
development will include the system's dry operation, simple single-button
operation, and a compact and self-contained design that does not require the
use of a separate computer. No ultrasound bone analyzer has been approved for
commercial sale in the United States. The timing of FDA clearance or approval
for ultrasound bone analyzers in the United States, developed by the Company
and others, could have a significant impact on their respective market shares.
The Company believes that ultrasound systems will compete with DXA systems in
the diagnostic market for initial screening of patients. However, the Company
believes that because ultrasound systems can only measure peripheral skeletal
sites and do not have the precision of DXA systems, DXA systems will continue
to be the predominant means of monitoring bone density for patients being
treated for or at high risk of osteoporosis.
Three companies have obtained FDA clearance to market biochemical marker
tests that evaluate bone turnover in a microtitre format. Ostex International
and Metra Biosystems have been cleared to market biochemical markers that
assess bone resorption. Hybritech and Metra Biosystems have been cleared to
market biochemical markers that assess bone formation. One or more of these
companies may develop point-of-care, over-the-counter or other biochemical
marker tests that would compete with the biochemical marker strip tests being
developed by the Company and Serex. Competition in this market will be based
upon price, product reliability, diagnostic sensitivity, precision and ease of
use. There can be no assurance that the Company and Serex will be able to
compete effectively in this market. See "Risk Factors--Competition; New
Products and Technological Change" and "--Reliance on Serex for the
Development of Biochemical Marker Strip Test."
MANUFACTURING
The Company's manufacturing operations for its DXA and ultrasound systems
consist primarily of assembly, test, burn-in and quality control. The Company
purchases a major portion of the parts and peripheral components for its
products, and manufactures certain subsystems, such as the high-voltage X-ray
power supply, from raw materials. Parts and materials are readily available
from several supply sources.
The Company is required to purchase all of its requirements for Scanora from
Soredex. Failure of Soredex to manufacture those systems on time and in
accordance with specifications would have an adverse impact on the Company's
sales of those systems.
BACKLOG
Backlog for the Company's systems as of November 30, 1995 and 1994 totaled
approximately $4.6 million and $4.9 million, respectively. Backlog consists of
purchase orders for which a delivery schedule within the next twelve months
has been specified by the customer. Orders included in backlog may be canceled
or rescheduled by customers without significant penalty. Backlog as of any
particular date should not be relied upon as indicative of the Company's net
revenues for any future period.
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RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on enhancing its
existing products and developing new products for the bone assessment market.
The Company's research and development personnel also are involved in
establishing protocols, monitoring and interpreting and submitting test data
to the FDA and other regulatory agencies to obtain the requisite clearances
and approvals for its products. At November 30, 1995, the Company had 32
persons engaged in research and development, of whom 23 persons were engaged
in the enhancement of the DXA product line and nine persons were engaged in
the development and enhancement of the Company's ultrasound systems. Of these
persons, ten persons were engaged in software development. The research and
development group was responsible for the introduction of the Company's fourth
generation QDR ACCLAIM series of DXA bone densitometers during 1995 and the
ongoing development of the Company's Sahara bone analyzer. During fiscal 1995,
1994 and 1993, the Company's research and product development expenses were
approximately $4.3 million, $3.4 million and $3.2 million, respectively.
PATENTS AND PROPRIETARY RIGHTS
The Company relies upon trade secrets and patents to protect its technology.
Due to the rapid technological change that characterizes the medical
instrumentation industry, the Company believes that the improvement of
existing products, reliance upon trade secrets and unpatented proprietary
know-how and the development of new products are generally as important as
patent protection in establishing and maintaining a competitive advantage.
Nevertheless, the Company has obtained patents and will continue to make
efforts to obtain patents, when available, in connection with its product
development program. The Company has obtained ten patents, licensed five
patents and has pending 17 patent applications in the United States relating
to its DXA technology, and has obtained three patents, licensed four patents
and has pending two patent applications in the United States relating to its
ultrasound technology. The Company has obtained or applied for corresponding
patents and patent applications for certain of these patents and patent
applications in certain foreign countries. There can be no assurance that any
of the Company's patent applications will be granted or that any patent or
patent application will provide significant protection for the Company's
products and technology. Moreover, there can be no assurance that foreign
intellectual property laws will protect the Company's intellectual property
rights. In the absence of significant patent protection, the Company may be
vulnerable to competitors who attempt to copy the Company's products,
processes or technology. See "Risk Factors--Uncertainty of Patent and
Proprietary Rights Protection."
In June 1989, the Company granted an exclusive worldwide license of certain
of its DXA technology to Vivid Technologies, Inc. for the sole purpose of
developing a baggage inspection and security system. See "Management--Vivid
Technologies, Inc."
Until recently, the Company had been involved in extensive patent litigation
with Lunar, with each party claiming that the other was infringing certain
patents held by the other. This litigation was settled by agreement dated
November 22, 1995. The agreement provides for certain royalties to be paid by
each party to the other for future sales of products using certain defined
technologies. The Company does not believe that amounts to be paid by either
party under this arrangement will be material. The agreement also provides
that neither party will engage the other party in patent litigation for a
period of ten years following the date of the agreement, regardless of the
infringement claimed and regardless of whether the technology in question
currently exists or is developed or acquired by the other party in the future.
Neither party is required to disclose to the other any of its technology
during this ten year period or otherwise. However, there can be no assurance
that Lunar will not use the Company's technology in a manner that would
materially and adversely affect the Company's business and results of
operations. See "Risk Factors--Uncertainty of Patent and Proprietary Rights
Protection."
THIRD PARTY REIMBURSEMENT
In the United States, the Health Care Finance Administration, which
establishes guidelines for the reimbursement of health care providers treating
Medicare and Medicaid patients, provided validation for DXA bone densitometry
examinations as a clinically useful procedure by recommending the
reimbursement for DXA
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bone evaluations at an initial rate of $68 per scan effective April 1994,
which was increased to $124 effective January 1995. The actual reimbursement
amounts provided for DXA examinations is determined by the individual state
Medicare carriers. As of December 1995, several of the more populous states,
including California, Connecticut, New York, New Jersey and Pennsylvania, had
no or only partial reimbursement of DXA examinations. In part as a result of
HCFA's recommendations, bone density examinations are paid for by many private
third party insurers in the United States.
In several European countries, Japan and other international markets, there
has generally been an earlier adoption of reimbursement for bone densitometry
exams. Countries in which reimbursement for the use of X-ray bone
densitometers has been approved include Belgium, Brazil, Canada, Germany,
Greece, Japan, South Korea, Spain and Switzerland. See "Risk Factors--
Uncertainty of Health Care Reform" and "--Third Party Reimbursement for Bone
Density Examinations."
REGULATION
The medical devices manufactured and marketed by the Company are subject to
regulation by the FDA and, in many instances, by foreign governments. Under
the Federal Food, Drug and Cosmetic Act (the "FDA Act"), manufacturers of
medical devices must comply with certain regulations governing the testing,
manufacturing, packaging and marketing of medical devices. The Company's
products are also subject to the Radiation Control for Health and Safety Act,
administered by the FDA, which imposes performance standards and record
keeping, reporting, product testing and product labeling requirements for
devices using radiation, such as X-rays.
The FDA generally must approve the commercial sale of new medical devices.
Commercial sales of the Company's medical devices within the United States
must be preceded by either a premarket notification filing pursuant to Section
510(k) of the FDA Act or the granting of a premarket approval. The 510(k)
notification filing must contain information that establishes that the device
is substantially equivalent to an existing device that has been continuously
marketed since May 28, 1976. The Company received FDA market clearance under
510(k) for its DXA bone densitometers and expects to be eligible to seek
510(k) clearance for its biochemical marker strip test for use by physicians,
once developed.
The premarket approval procedure involves a more complex and lengthy testing
and review process by the FDA than the 510(k) premarket notification procedure
and often requires at least several years to obtain. The Company must first
obtain an investigational device exemption ("IDE") for the product to conduct
extensive clinical testing of the device to obtain the necessary clinical data
for submission to the FDA. The FDA will thereafter only grant premarket
approval if, after evaluating this clinical data, it finds that the safety and
efficacy of the product has been sufficiently demonstrated. This approval may
restrict the number of devices distributed or require additional patient
follow-up for an indefinite period of time. The Company believes that the
approval to market its ultrasound products and its over-the-counter
biochemical marker strip test, once developed, in the United States may be
subject to this more stringent FDA review process.
The Company's systems are also subject to approval by certain foreign
regulatory and safety agencies. The Company is awaiting regulatory approval of
the Company's QDR 4500 ACCLAIM systems in Japan and certain other foreign
countries, and has obtained the requisite regulatory approvals for the systems
in certain other countries.
No assurance can be given that the FDA or foreign regulatory agencies will
give the requisite approvals or clearances for any of the Company's medical
devices under development on a timely basis, if at all. Moreover, after
clearance is given, these agencies can later withdraw the clearance or require
the Company to change the device or its manufacturing process or labeling, to
supply additional proof of its safety and effectiveness, or to recall, repair,
replace or refund the cost of the medical device, if it is shown to be
hazardous or defective. The process of obtaining clearance to market products
is costly and time-consuming and can delay the marketing and sale of the
Company's products.
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As a manufacturer of medical devices, the Company is subject to certain
other FDA regulations and the Company's manufacturing processes and facilities
are subject to continuing review by the FDA. Most states and certain other
foreign countries monitor and require licensing of X-ray devices. Federal,
state and foreign regulations regarding the manufacture and sale of medical
devices are subject to future change. The Company cannot predict what impact,
if any, such changes might have on its business.
EMPLOYEES
As of November 30, 1995, the Company had 191 full-time employees, including
53 in manufacturing operations, 32 in research and development, 71 in
marketing, sales and support services, 27 in finance and administration and
eight in medical data management. None of the Company's employees are
represented by a union. The Company considers its employee relations to be
good.
PROPERTIES
The Company leases a 83,500 square foot building located in Waltham,
Massachusetts. The initial term of the lease expires in June 1996, with the
Company having an option to extend the lease for an additional four years. The
Company has subleased approximately 26,500 square feet of this space to Vivid,
an affiliate of Mr. Ellenbogen and Dr. Stein. During fiscal 1995, Vivid paid
the Company approximately $320,000 for this space. The Company and Vivid have
agreed that Vivid will vacate this space by the end of the second quarter of
fiscal 1996, which the Company will then occupy. The Company also leases an
additional 3,100 square feet of nearby office space under a tenancy at will.
The Company believes that its facilities will be adequate for its needs for
the foreseeable future. The Company also maintains sales and service offices
in France, Belgium and Spain. The Company believes that it has adequate space
for its anticipated needs and that suitable additional space will be available
at commercially reasonable prices as needed. See "Management--Vivid
Technologies, Inc."
LEGAL PROCEEDINGS
Except as set forth below, the Company is not a party to any material legal
proceedings.
On November 22, 1995, the Company and Lunar entered into a settlement
agreement relating to litigation involving allegations of each party against
the other of patent infringement. See "Business--Patents and Proprietary
Rights."
On January 24, 1995, B.V. Optische Industrie de Oude Delft and two
subsidiaries ("Oldelft") filed suit in the United States District Court for
the Southern District of New York against the Company and the University of
Rochester seeking unspecified treble damages, attorneys' fees and costs
relating to a prior patent dispute between the Company and Oldelft relating to
equalization radiography, including costs related to actions before the United
States Patent and Trademark Office and certain litigation instituted by the
Company against Oldelft in 1991. Oldelft also requests the court to declare
invalid the United States patent for equalization radiography technology
formerly owned by the Company. Oldelft alleges that the Company and the
University of Rochester conspired to obtain fraudulently equalization
radiography patents and to pursue litigation against Oldelft in violation of
Title IX of the Organized Crime Control Act of 1970 ("RICO") and the United
States antitrust laws. In November 1992, the Company agreed to transfer to
Konica Corporation its rights to the patents and know-how incorporated in the
Company's equalization radiography product that was then under development. As
a result of this transfer, the Company has no products that are planned or
under development using this technology. The Company believes that it has
meritorious defenses and has sought a dismissal of Oldelft's claims. There can
be no assurance that the Company will prevail in having these claims
dismissed, and if not dismissed, that the Company will prevail in the defense
of these claims. Even if such defense is successful, the cost of litigation
can be expensive and time consuming and materially adversely affect the
Company's results of operations.
33
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
S. David Ellenbogen................. 57 Chairman of the Board and
Chief Executive Officer
Steve L. Nakashige.................. 46 President and Chief Operating Officer
Jay A. Stein........................ 53 Senior Vice President, Technical
Director and Director
Jean Chaintreuil.................... 40 Vice President of European Operations
Mark A. Duerst...................... 39 Vice President of Sales & Marketing
Glenn P. Muir....................... 36 Vice President of Finance and Treasurer
Theodore H. Vrountas................ 61 Vice President of Operations
Joel B. Weinstein................... 45 Vice President of New Business
Development
Irwin Jacobs(1)(2).................. 58 Director
William A. Peck(1).................. 62 Director
Gerald Segel(1)(2).................. 74 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
S. David Ellenbogen, a co-founder of the Company, has served as its Chief
Executive Officer and a director since its organization in October 1985, as
its Chairman of the Board of Directors since May 1994, as its President from
October 1985 until May 1994 and as its Treasurer from October 1985 until
February 1992. Prior to founding the Company, Mr. Ellenbogen served as
President, Treasurer and a director of Diagnostic Technology, Inc. ("DTI"),
which he co-founded with Dr. Stein in 1981. DTI, which developed an X-ray
product for digital angiography, was acquired in 1982 by Advanced Technology
Laboratories, Inc. ("ATL"), a wholly-owned subsidiary of Squibb Corporation.
Mr. Ellenbogen was involved in the management of the digital angiography group
of ATL from 1982 to 1985. Since July 1989, Mr. Ellenbogen has also been the
President, Treasurer and a director of Vivid and has been devoting
approximately sixteen hours per week to Vivid pursuant to a management
agreement between the Company and Vivid. See "Management--Vivid Technologies,
Inc."
Steve L. Nakashige has served as President and Chief Operating Officer of
the Company since May 1994. From 1988 to 1994, Mr. Nakashige was with General
Electric Medical Systems where he held the position of Senior Manager,
Ultrasound Business, from 1990 to 1994, and Manager, Ultrasound Marketing
Operations, from 1988 to 1990. From 1986 to 1988, Mr. Nakashige was Vice
President of Operations of Biosound Inc., a medical equipment manufacturer.
Jay A. Stein, a co-founder of the Company, has served as its Senior Vice
President, Technical Director and a director since its organization. Dr. Stein
co-founded DTI with Mr. Ellenbogen in 1981, served as Vice President and
Technical Director of DTI and was Technical Director of the digital
angiography group of its successor, ATL, from 1982 to 1985. Dr. Stein received
a Ph.D. in Physics from The Massachusetts Institute of Technology. He is the
principal author of fifteen patents involving X-ray technology. Since July
1989, Dr. Stein has also been the Senior Vice President, Technical Director
and a director of Vivid and has been devoting approximately eight hours per
week to Vivid pursuant to a management agreement between the Company and
Vivid. See "Management--Vivid Technologies, Inc."
34
<PAGE>
Jean Chaintreuil has served as Vice President of European Operations of the
Company since February 1993. Mr. Chaintreuil has held the position of
President, Hologic Europe since joining the Company in October 1991. From 1986
to 1991, Mr. Chaintreuil held a variety of positions with General
Electric/C.G.R., including International Marketing Manager for mammography and
stand-alone products and Regional Sales and Service Manager for the Paris and
west France territory.
Mark A. Duerst has served as Vice President of Sales & Marketing since
September 1994. Prior to that, Mr. Duerst held the position of Director of
North American Sales since 1990 and the position of Central Regional Sales
Manager since joining the Company in 1989. From 1988 to 1989, Mr. Duerst was
an independent marketing and sales consultant, and from 1983 to 1987 he was
Director of Sales & Marketing of Lunar Corporation.
Glenn P. Muir, a Certified Public Accountant, has served as Vice President
of Finance and Treasurer of the Company since February 1992. Prior to that,
Mr. Muir held the position of Controller since joining the Company in October
1988. From 1986 to 1988, Mr. Muir was Vice President of Finance and
Administration and Chief Financial Officer of Metallon Engineered Materials
Corp., a manufacturer of composite materials. Mr. Muir received an MBA from
the Harvard Graduate School of Business Administration in 1986.
Theodore H. Vrountas has served as Vice President of Operations since March
1994 and as an executive officer of the Company since December 1994. Prior to
joining the Company, Mr. Vrountas was employed with GTE Government Systems for
twenty-five years. His most recent position with GTE was Director of
Operations for the Communications Systems Division from 1987 to 1993.
Joel B. Weinstein has served as Vice President of New Business Development
since August 1993. Prior to that, Mr. Weinstein held the position of Vice
President of Marketing since joining the Company in 1987. From 1980 to 1987,
Mr. Weinstein held a variety of positions with Advanced Technology
Laboratories, Inc., including Marketing Director from 1982 to 1984 and Vice
President, Business Development from 1984 to 1987.
Irwin Jacobs has been a director of the Company since January 1990. Mr.
Jacobs has been the President of Datives, Inc., a company which manufactures
and distributes software products, since January 1992. Since December 1990,
Mr. Jacobs has also been the Chairman of the Board of Personal Protection
Consultants, Inc., a company which provides specialized training to hospitals
and law enforcement agencies. From May 1990 to December 1990, Mr. Jacobs was a
Vice President of Ask Computers, Inc., a computer system developer. From 1987
to May 1990, Mr. Jacobs was the President and Chairman of the Board of
Directors of Perception Technology Corp., a manufacturer of voice response
systems.
William A. Peck has been a director of the Company since January 1990. In
1989, Dr. Peck became the Vice Chancellor for Medical Affairs at Washington
University (Executive Vice Chancellor since 1993) and Dean of the Washington
University School of Medicine in St. Louis, Missouri. From 1976 until his
appointment as Vice Chancellor, Dr. Peck was a Professor of Medicine and the
Co-Chairman of the Department of Medicine at Washington University, and the
Physician-in-Chief at the Jewish Hospital of St. Louis. Dr. Peck is a member
of the Board of Trustees of the National Osteoporosis Foundation and served as
its President from 1985 to 1990. Dr. Peck also serves as a director of Allied
Healthcare Products, Inc., Reinsurance Group of America, Inc. and Boatman's
Trust Company.
Gerald Segel has been a director of the Company since March 1990. Mr. Segel,
currently retired, was Chairman of the Board of Tucker Anthony Incorporated
from January 1987 to May 1990. From 1983 through January 1987 he served as
President of Tucker Anthony Incorporated. Mr. Segel also serves as a director
of Litchfield Financial, Inc.
35
<PAGE>
VIVID TECHNOLOGIES, INC.
In June 1989, the Company granted an exclusive worldwide license of certain
of its QDR technology to Vivid Technologies, Inc. for the sole purpose of
developing a baggage inspection and security system. Mr. Ellenbogen and Dr.
Stein are directors of Vivid and hold similar offices in Vivid as they do in
the Company. Mr. Ellenbogen and Dr. Stein collectively own approximately 23%
of the outstanding voting stock of Vivid.
In return for its license of the QDR technology, Vivid is required to pay
the Company royalties of 5% of the first $50 million of net sales of products
using the Company's technology, and 3% of net sales in excess of $50 million,
up to a maximum of $200 million of net sales. The maximum aggregate royalties
payable by Vivid to the Company under this arrangement are $7 million. In
fiscal 1995, Vivid paid the Company royalties of approximately $719,000 under
the License Agreement.
Under a management agreement, the Company has agreed to provide Vivid with
management, engineering and administrative support, and space at the Company's
facilities. The Company and Vivid have agreed that Vivid will vacate this
space by the end of the second quarter of fiscal 1996. The support services
provided by the Company under this arrangement include the part-time
management services of Mr. Ellenbogen and Dr. Stein and other managerial
personnel, and secretarial, telephone and similar services. Vivid is required
to pay the Company its proportionate share of the Company's overhead,
including rent and the salary of the Company's employees rendering services to
Vivid. Under this arrangement, no compensation is paid by Vivid to any of the
Company's employees. The management agreement may be terminated by either
party on six months written notice. For the fiscal year ended September 30,
1995, Vivid was charged approximately $740,000 by the Company for services
rendered under the agreement, manufactured sub-assemblies, spare parts and
space at the Company's facilities. In December 1995, Vivid paid the Company a
$40,000 bonus for the management services provided in fiscal 1995. The Company
estimates that Mr. Ellenbogen and Dr. Stein have been spending approximately
16 and eight hours per week, respectively, on matters involving Vivid.
36
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information as of December 11, 1995
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person who owns beneficially more than 5% of the outstanding shares of
Common Stock, and (ii) the stockholders of the Company who have granted an
over-allotment option to the Underwriters (the "Selling Stockholders"). This
information is based upon information received from or on behalf of the named
individuals. All the Selling Stockholders are either executive officers or
directors of the Company. See "Management."
<TABLE>
<CAPTION>
SHARES SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BENEFICIALLY OWNED AFTER OFFERING IF AFTER OFFERING IF
PRIOR TO OVER-ALLOTMENT OPTION NOT OVER-ALLOTMENT OPTION
OFFERING(1) EXERCISED NUMBER OF EXERCISED(1)
------------------ ----------------------------- SHARES -----------------------------
NAME OF BENEFICIAL BEING
OWNER* NUMBER PERCENTAGE NUMBER PERCENTAGE OFFERED(1) NUMBER PERCENTAGE
------------------ ------- ---------- -------------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
S. David Ellenbogen(2).. 313,130 7.4% 313,130 5.8% 60,000 253,130 4.6%
Jay A. Stein(3)......... 274,190 6.5 274,190 5.1 60,000 214,190 3.9
Steve L. Nakashige(4)... 52,960 1.3 52,960 * 5,000 47,960 *
Irwin Jacobs(4)......... 11,000 * 11,000 * 3,000 8,000 *
William A. Peck(4)...... 3,000 * 3,000 * 1,000 2,000 *
Gerald Segel(4)......... 11,000 * 11,000 * 5,000 6,000 *
</TABLE>
- --------
*Less than one percent.
(1) Unless otherwise noted, each person identified possesses sole voting and
investment power with respect to the shares listed.
(2) Includes (i) 27,150 shares held by, or in trust for, Mr. Ellenbogen's
children and grandchildren and (ii) 7,190 shares held by Mr. Ellenbogen as
trustee, all of which shares Mr. Ellenbogen disclaims beneficial
ownership. Also includes options to purchase 28,440 shares of Common Stock
which are exercisable within 60 days after the date of this Prospectus.
Certain of these options are subject to stockholder approval.
(3) Includes (i) 7,190 shares held by, or in trust for, Dr. Stein's children
and (ii) 18,250 shares held by Dr. Stein as trustee or custodian, all of
which shares Dr. Stein disclaims beneficial ownership. Also includes
options to purchase 28,440 shares of Common Stock which are exercisable
within 60 days after the date of this Prospectus. Certain of these options
are subject to stockholder approval.
(4) Includes the following shares subject to options exercisable within 60
days after the date of this Prospectus: Mr. Nakashige -- 52,960; Mr.
Jacobs -- 11,000; Dr. Peck -- 3,000; and Mr. Segel -- 11,000. Certain of
these options are subject to stockholder approval.
37
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 10,000,000 shares of
Common Stock, $.01 par value, and 1,622,685 shares of Preferred Stock, $.01
par value. The Board of Directors of the Company has approved an increase in
the number of authorized shares of Common Stock to 30,000,000 shares, subject
to stockholder approval at the Company's Annual Meeting of Stockholders to be
held on February 27, 1996.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders and are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor. Upon liquidation or
dissolution of the Company, the holders of Common Stock are entitled to
receive all assets available for distribution to the stockholders, subject to
any preferential or other rights of the holders of Preferred Stock. The Common
Stock has no preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to
such shares. The holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. The
holders of Common Stock do not have cumulative voting rights in the election
of directors. All of the shares of Common Stock are, and the shares to be sold
in this offering will be, fully paid and nonassessable.
As of December 11, 1995, there were 4,179,635 shares of Common Stock
outstanding, held of record by approximately 223 stockholders. The Board of
Directors of the Company has declared a two-for-one stock split in the form of
a stock dividend to be paid in March 1996, subject to stockholder approval of
the proposed increase in the number of authorized shares of Common Stock at
the Company's upcoming Annual Meeting of Stockholders. The Board of Directors
reserves the right to revoke or alter the terms of the stock split.
PREFERRED STOCK
The Company is authorized to issue up to 1,622,685 shares of Preferred
Stock, none of which are outstanding. The Board of Directors may, without
future action of the stockholders of the Company, issue the Preferred Stock in
one or more classes or series and fix the rights and preferences thereof,
including the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices. liquidation preferences and the number of shares constituting
any class or series, or the designations of such class or series.
The voting and other rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred
Stock that may be issued in the future. Issuances of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
a majority of the outstanding voting stock of the Company. The Company has no
present plans to reissue any shares of Preferred Stock.
CERTAIN PROVISIONS AFFECTING STOCKHOLDERS
In addition to the Preferred Stock, the Certificate of Incorporation
includes several additional provisions which may render more difficult an
unfriendly tender offer, proxy contest, merger or other change in control of
the Company. These provisions may discourage bids for the Company and
therefore may limit the price that certain investors might be willing to pay
in the future for shares of the Company's Common Stock.
The Certificate of Incorporation contains a so-called "anti-greenmail"
provision. The provision is intended to discourage speculators who accumulate
beneficial ownership of a significant block of stock and then, under the
threat of making a tender offer or proxy contest or instigating some other
corporate disruption, succeed in extracting from the corporation a premium
price to repurchase the shares acquired by the speculator. This tactic
38
<PAGE>
has become known as greenmail. The anti-greenmail provision prohibits the
Company from purchasing any shares of Common Stock from a Related Person at a
per share price in excess of the fair market value at the time of such
purchase, unless the purchase is approved by two-thirds of the holders of the
outstanding shares of Common Stock, excluding any votes cast by the Related
Person. The term Related Person is defined in general to mean any person,
other than a founder of the Company (Mr. Ellenbogen and Dr. Stein), who
acquires more than 5% of the Company's voting stock. Stockholder approval is
not required for such purchases when the offer is made available on the same
terms to all holders of shares of Common Stock or when the purchases are
effected on the open market.
The Certificate of Incorporation also contains a provision that will require
the affirmative vote of the holders of 80% of the outstanding Common Stock to
approve amendments to the Certificate of Incorporation or to approve
extraordinary transactions that are required to be approved by stockholders
under the Delaware General Corporation Law, including mergers, sales of
substantially all of the Company's assets and dissolution, which actions are
not approved by a majority of the Continuing Directors (as defined below) of
the Company. The Certificate of Incorporation provides that the affirmative
vote of the holders of only a majority of the outstanding Common Stock is
required to approve such matters if they have been approved by the Continuing
Directors. The term Continuing Director is defined to mean (i) any member of
the Board of Directors who is unaffiliated with a Related Person and was a
member of the Board of Directors prior to the time any person became a Related
Person and (ii) any successor to such a Continuing Director who is not
affiliated with any Related Person and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors. A majority of the Continuing Directors can designate a new director
to be a Continuing Director, even though such person is affiliated with a
Related Person.
The Continuing Directors are currently closely affiliated with management
and are anticipated to continue to be so into the foreseeable future.
Accordingly, the effect of the provision of the Company's Certificate of
Incorporation described in the preceding paragraph would be to make it
unlikely that any transaction requiring a stockholder vote would receive the
requisite approval unless supported by management. The 80% voting requirement
would apply to recapitalizations, management-led buy-outs and other
management-led transactions requiring the vote of stockholders under the
Delaware General Corporation Law, if such transactions were not approved by
the Continuing Directors. However, because of the likelihood of the close
association of the Continuing Directors to management, it would be more likely
that such transactions would obtain the approval of the Continuing Directors
and require only majority stockholder approval.
Another provision included in the Certificate of Incorporation requires the
Board of Directors to consider social, economic and other factors in
evaluating whether certain types of corporate transactions proposed by another
party are in the best interests of the Company and its stockholders. These
transactions include (i) the purchase or acquisition through exchange or
otherwise of any of the Company's outstanding equity securities, (ii) the
merger or consolidation of the Company with another corporation and (iii) the
purchase or other acquisition of all or substantially all of the Company's
properties and assets.
Section 203 of the Delaware General Corporation Law prohibits a Delaware
corporation from engaging in a wide range of specified transactions with any
interested stockholder, defined to include, among others, any person or entity
who in the last three years obtained 15% or more of any class or series of
stock entitled to vote in the election of directors, unless, among other
exceptions, the transaction is approved by (i) the Board of Directors prior to
the date the interested stockholder obtained such status or (ii) the holders
of two-thirds of the outstanding shares of each class or series of stock
entitled to vote generally in the election of directors, not including those
shares owned by the interested stockholder. By virtue of the Company's
decision not to elect out of the statute's provisions, the statute applies to
the Company.
39
<PAGE>
RIGHTS DISTRIBUTION
In 1992, the Board of Directors declared a dividend distribution of one
right (a "Right") for each outstanding share of Common Stock held of record on
December 22, 1992 or issued thereafter prior to the "Separation Time," as
defined below. After December 22, 1992 and for so long as the Rights are not
transferable separately from the Common Stock, one Right is deemed to be
delivered with each share of Common Stock issued or transferred by the
Company.
The "Separation Time" is the close of business on the earlier of (i) the
tenth business day (or such earlier or later date not beyond the thirtieth day
as the Board of Directors may decide) (a "Flip-in Date"), after the
announcement that a person has acquired 15% or more of the outstanding Common
Stock of the Company (or that a person already owning 15% has acquired any
more Common Stock) (an "Acquiring Person") or (ii) the tenth business day (or
such later date as the Board of Directors may decide) after any person
commences a tender or exchange offer to acquire beneficial ownership of 15% or
more of the outstanding shares of Common Stock. Until the Separation Time, the
Rights will be evidenced solely by the Common Stock certificates and may be
transferred only with the Common Stock.
After the Separation Time, the Rights become exercisable and may be
transferred independently of shares of Common Stock, and separate certificate
evidencing the Rights will be mailed to stockholders. The Rights will expire
on the earlier of (i) December 22, 2002, or (ii) the date on which the Rights
are redeemed.
Commencing after the Flip-in Date has occurred, the holders of Rights,
except the Acquiring Person, are entitled to purchase that number of shares of
the Company's Common Stock having a market value equal to twice the exercise
price of $30 per share (the "Exercise Price"). However, in lieu of the rights
to purchase shares of the Company's Common Stock at an effective 50% discount,
the Board of Directors of the Company may elect to issue one share of Common
Stock for each Right held by each holder other than the Acquiring Person.
After an Acquiring Person has become such, and prior to the expiration of
the Rights, the Company may not (i) consolidate or merge with any other
person, (ii) sell or otherwise transfer to any other person more than 50% of
the Company's assets, or assets generating more than 50% of the Company's
operating income or cash flow, (iii) engage in certain self-dealing
transactions with Acquiring Persons, or (iv) permit certain events to occur
when there is an Acquiring Person, if at the time of such merger, sale or
self-dealing transaction the Acquiring Person controls the board of directors
and, in the case of merger, will receive different treatment than other
stockholders, unless in any such case provision is made so that each holder of
a Right will thereafter have the right to receive, at the then current
Exercise Price, a number of shares of common stock of the Acquiring Person
engaging in the transaction having a market value equal to two times the
Exercise Price of the Right.
The Rights may be terminated by the Company at any time prior to the close
of business on a Flip-in Date.
The provisions in the Restated Certificate of Incorporation and amended and
Restated By-Laws referred to above, and the authority under the 1986 Long-Term
Incentive Plan to grant options with accelerated vesting schedules in the
event of a change in control of the Company, as well as the authority of the
Board of Directors to issue additional shares of Common Stock and accelerate
the exercisability of the Rights could be used by the Board of Directors in a
manner calculated to prevent the removal of management and make more difficult
or discourage a change in control of the Company. The distribution of Rights
and certain aspects of the foregoing provisions in the Company's Restated
Certificate of Incorporation and Amended and Restated By-Laws were designed to
afford the Board of Directors the opportunity to evaluate the terms of a
takeover attempt without haste or undue pressure, advise stockholders of its
findings, and to negotiate to protect the interests of all stockholders. See
"Risk Factors--Anti-takeover Provisions; Management Control."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is the American Stock
Transfer & Trust Company.
40
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement,
the Underwriters named below, for whom Needham & Company, Inc., Tucker Anthony
Incorporated and Adams, Harkness & Hill, Inc. are acting as representatives
(the "Representatives"), have severally agreed to purchase from the Company,
and the Company has agreed to sell to each Underwriter, the aggregate number
of shares of Common Stock set forth opposite their respective names in the
table below. The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to certain conditions precedent, and that the Underwriters are
committed to purchase and pay for all shares if any are purchased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Needham & Company, Inc.........................................
Tucker Anthony Incorporated....................................
Adams, Harkness & Hill, Inc....................................
---------
Total........................................................ 1,200,000
=========
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concession not
in excess of $ per share. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to certain other
dealers (who may include the Underwriters). After the offering to the public,
the public offering price and other selling terms may be changed by the
Representatives.
The Company and the Selling Stockholders have granted the Underwriters an
option, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to 180,000 additional shares of Common Stock at the
public offering price, less the underwriting discounts and commissions, set
forth on the cover page of this Prospectus. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
Common Stock offered hereby. To the extent the Underwriters exercise such
option, each of the Underwriters will have a firm commitment, subject to
certain exceptions, to purchase approximately the same percentage of such
additional shares that the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total shown.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Selling Stockholders and the Company against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act").
The Company has agreed not to offer, sell or otherwise dispose of any shares
of Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Needham & Company, Inc., except for the
shares of Common Stock offered hereby and except that the Company may issue
securities pursuant to the Company's stock option plans. S. David Ellenbogen
and Jay A. Stein, who hold in the aggregate 496,060 shares of Common Stock and
currently exercisable options to purchase 56,880 shares of Common Stock, have
agreed that if the Underwriters' over-allotment option is exercised in full
they will not, directly or indirectly, offer to sell, sell, or otherwise
dispose of shares of Common Stock or any securities convertible or
exchangeable therefor, for a period of 180 days after the date of this
Prospectus, without the prior written consent of Needham & Company, Inc.,
subject to certain limited exceptions.
41
<PAGE>
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject any order for the purchase of shares in whole or in part.
In connection with this offering, certain Underwriters and selling group
members (if any) who are qualifying registered market makers on the Nasdaq
National Market may engage in passive market making transactions in the Common
Stock of the Company on the Nasdaq National Market in accordance with Rule
10b-6A under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") during the two business day period before commencement of the offers or
sales of the Common Stock. The passive market making transactions must comply
with applicable volume and price limits and be identified as such. In general,
a passive market maker may display its bid at a price not in excess of the
highest independent bid for the security; if all independent bids are lowered
below the passive market maker's bid, however, such bid must then be lowered
when certain purchase limits are exceeded.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon for the
Company and the Selling Stockholders by Brown, Rudnick, Freed & Gesmer,
Boston, Massachusetts. Certain legal matters in connection with the Common
Stock offered hereby will be passed upon for the Underwriters by Testa,
Hurwitz & Thibeault, Boston, Massachusetts. A member of Brown, Rudnick, Freed
& Gesmer is the Secretary of the Company and owns 1,000 shares of Common Stock
and options to purchase 5,000 shares of Common Stock.
EXPERTS
The financial statements and schedules included or incorporated by reference
in this Prospectus and elsewhere in the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are included or incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, NW, Room 1024, Judiciary Plaza, Washington,
D.C. 20549, and at the Commission's Regional Offices at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048, at prescribed rates.
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-3 under the Securities Act with respect to
the Common Stock being offered hereby. This Prospectus does not contain all of
the information set forth in such Registration Statement and the exhibits and
schedules thereto to which reference is hereby made. The statements in this
Prospectus as to the contents of such Registration Statement are qualified in
their entirety by such reference. The Registration Statement, together with
its exhibits and schedules, may be inspected without charge at the Public
Reference Section of the Commission in Washington, D.C. at the address noted
above, and copies of all or any part thereof may be obtained from the
Commission upon payment of the prescribed fees.
42
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated herein by reference: (1) the Company's Annual Report on
Form 10-K for the fiscal year ended September 24, 1994; (2) the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended December 24,
1994, March 25, 1995 and June 24, 1995; and (3) the description of the
Company's Common Stock contained in the Company's registration statement on
Form 8-A.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of the Common
Stock hereunder shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents referred to
above, excluding exhibits thereto. Requests should be made to: Investor
Relations, Hologic, Inc., 590 Lincoln Street, Waltham, Massachusetts 02154,
telephone number (617) 890-2300.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein, or in any other subsequently filed document that also is (or is deemed
to be) incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
43
<PAGE>
HOLOGIC, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of September 24, 1994 and September 30,
1995..................................................................... F-3
Consolidated Statements of Operations for the years ended September 25,
1993, September 24, 1994 and September 30, 1995.......................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
September 25, 1993, September 24, 1994 and September 30, 1995............ F-5
Consolidated Statements of Cash Flows for the years ended September 25,
1993, September 24, 1994 and September 30, 1995.......................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hologic, Inc.:
We have audited the accompanying consolidated balance sheets of Hologic,
Inc. (a Delaware corporation) and subsidiaries as of September 24, 1994 and
September 30, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hologic, Inc. and
subsidiaries as of September 24, 1994 and September 30, 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1995, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 22, 1995
F-2
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
24, 1994 30, 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 5,880,010 $ 7,447,813
Short-term investments............................. 3,519,515 2,492,671
Accounts receivable, less reserves of $850,000..... 10,893,649 11,643,883
Inventories........................................ 4,435,033 6,917,000
Prepaid expenses and other current assets.......... 1,584,132 2,058,707
----------- -----------
Total current assets............................. 26,312,339 30,560,074
----------- -----------
Property and Equipment, at cost:
Equipment.......................................... 1,922,473 2,600,381
Furniture and fixtures............................. 553,393 652,446
Leasehold improvements............................. 448,529 506,495
----------- -----------
2,924,395 3,759,322
Less--Accumulated depreciation and amortization.... 1,796,826 2,298,168
----------- -----------
1,127,569 1,461,154
----------- -----------
Other Assets, net.................................... 1,057,254 1,840,785
----------- -----------
$28,497,162 $33,862,013
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit..................................... $ 2,417,034 $ 2,058,898
Accounts payable................................... 1,865,413 3,773,000
Accrued expenses................................... 3,474,482 3,965,750
Deferred revenue................................... 867,861 1,392,667
----------- -----------
Total current liabilities........................ 8,624,790 11,190,315
----------- -----------
Commitments and Contingencies (Notes 8 and 13)
Stockholders' Equity:
Preferred stock, $.01 par value--
Authorized--1,622,685 shares
Issued and outstanding--none..................... -- --
Common stock, $.01 par value--
Authorized--10,000,000 shares
Issued and outstanding--4,024,581 shares and
4,122,100 shares in 1994 and 1995, respectively. 40,246 41,221
Capital in excess of par value....................... 14,450,085 15,354,893
Retained earnings.................................... 5,551,074 7,420,593
Cumulative translation adjustment.................... (169,033) (145,009)
----------- -----------
Total stockholders' equity....................... 19,872,372 22,671,698
----------- -----------
$28,497,162 $33,862,013
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
SEPTEMBER SEPTEMBER SEPTEMBER
25, 1993 24, 1994 30, 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Product sales........................ $24,139,565 $37,056,109 $41,129,782
Other revenue........................ 708,831 1,427,634 2,270,068
----------- ----------- -----------
24,848,396 38,483,743 43,399,850
----------- ----------- -----------
Costs and Expenses:
Cost of product sales................ 13,729,012 20,865,075 22,090,963
Research and development............. 3,182,412 3,441,871 4,300,474
Selling and marketing................ 5,472,413 5,892,377 7,835,418
General and administrative........... 3,500,998 4,189,377 4,461,335
Litigation expenses.................. -- -- 2,533,493
Restructuring costs.................. 900,000 -- --
----------- ----------- -----------
26,784,835 34,388,700 41,221,683
----------- ----------- -----------
Income (loss) from operations...... (1,936,439) 4,095,043 2,178,167
Interest Income........................ 300,468 315,886 609,678
Other Expense.......................... (438,869) (80,752) (268,326)
----------- ----------- -----------
Income (loss) before income taxes.. (2,074,840) 4,330,177 2,519,519
Provision (Benefit) for Income Taxes... (300,000) 1,335,000 650,000
----------- ----------- -----------
Net income (loss).................. $(1,774,840) $ 2,995,177 $ 1,869,519
=========== =========== ===========
Net Income (Loss) Per Common and Common
Equivalent Share:
Primary.............................. $ (.45) $ .71 $ .43
=========== =========== ===========
Fully diluted........................ $ .69 $ .41
=========== ===========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding:
Primary.............................. 3,930,068 4,194,914 4,375,880
=========== =========== ===========
Fully diluted........................ 4,341,810 4,575,426
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
$.01 CAPITAL IN CUMULATIVE TOTAL
NUMBER OF PAR EXCESS OF RETAINED TRANSLATION STOCKHOLDERS'
SHARES VALUE PAR VALUE EARNINGS ADJUSTMENT EQUITY
--------- ------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1992................... 3,906,100 $39,061 $13,824,437 $4,330,737 $ (77,475) $18,116,760
Exercise of stock
options and stock
purchase warrants.... 29,650 296 10,107 -- -- 10,403
Issuance of common
stock for patent
acquisition.......... 10,667 107 49,893 -- -- 50,000
Net loss.............. -- -- -- (1,774,840) -- (1,774,840)
Translation
adjustments.......... -- -- -- -- (90,104) (90,104)
--------- ------- ----------- ---------- --------- -----------
Balance, September 25,
1993................... 3,946,417 39,464 13,884,437 2,555,897 (167,579) 16,312,219
Exercise of stock
options.............. 78,164 782 365,648 -- -- 366,430
Tax benefit from stock
options exercised.... -- -- 200,000 -- -- 200,000
Net income............ -- -- -- 2,995,177 -- 2,995,177
Translation
adjustments.......... -- -- -- -- (1,454) (1,454)
--------- ------- ----------- ---------- --------- -----------
Balance, September 24,
1994................... 4,024,581 40,246 14,450,085 5,551,074 (169,033) 19,872,372
Exercise of stock
options.............. 64,718 647 241,895 -- -- 242,542
Issuance of common
stock under employee
stock purchase plan.. 4,780 48 59,105 -- -- 59,153
Stock issuance in
conjunction with
collaboration
agreement............ 28,021 280 323,808 -- -- 324,088
Tax benefit from stock
options exercised.... -- -- 280,000 -- -- 280,000
Net income............ -- -- -- 1,869,519 -- 1,869,519
Translation
adjustments.......... -- -- -- -- 24,024 24,024
--------- ------- ----------- ---------- --------- -----------
Balance, September 30,
1995................... 4,122,100 $41,221 $15,354,893 $7,420,593 $(145,009) $22,671,698
========= ======= =========== ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss).................. $(1,774,840) $2,995,177 $1,869,519
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities--
Depreciation and amortization.... 424,787 593,519 565,806
Changes in assets and
liabilities--
Accounts receivable............ (680,391) (5,738,374) (883,961)
Inventories.................... 238,727 (387,204) (2,445,327)
Prepaid expenses and other
current assets................ (21,539) (580,031) (411,442)
Accounts payable............... 518,306 (131,964) 1,781,387
Accrued expenses............... 884,779 241,960 525,350
Deferred revenue............... 121,604 27,344 505,765
----------- ---------- ----------
Net cash provided by (used
in) operating activities.... (288,567) (2,979,573) 1,507,097
----------- ---------- ----------
Cash Flows from Investing Activities:
Net (purchases) sales of short-term
investments....................... 4,736,921 (79,340) 1,026,844
Purchase of property and equipment,
net............................... (213,426) (495,159) (802,822)
Increase in other assets........... (286,448) (37,579) (193,729)
----------- ---------- ----------
Net cash provided by (used
in) investing activities.... 4,237,047 (612,078) 30,293
----------- ---------- ----------
Cash Flows from Financing Activities:
Borrowings (settlement) under line
of credit......................... -- 2,311,352 (536,200)
Net proceeds from sale of common
stock............................. 10,403 366,430 301,695
Tax benefit from stock options
exercised......................... -- 200,000 280,000
----------- ---------- ----------
Net cash provided by
financing activities........ 10,403 2,877,782 45,495
----------- ---------- ----------
Effect of Exchange Rate Changes on
Cash................................ 359,645 (94,627) (15,082)
----------- ---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents.................... 4,318,528 (808,496) 1,567,803
Cash and Cash Equivalents, beginning
of year............................. 2,369,978 6,688,506 5,880,010
----------- ---------- ----------
Cash and Cash Equivalents, end of
year................................ $ 6,688,506 $5,880,010 $7,447,813
=========== ========== ==========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the year for
income taxes...................... $ 214,072 $1,259,940 $ 182,809
=========== ========== ==========
Supplemental Schedule of Noncash
Transactions:
Common stock issued for patent
acquisition....................... $ 50,000 $ -- $ --
=========== ========== ==========
Preferred stock investment acquired
in exchange for common stock...... $ -- $ -- $ 324,088
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS
Hologic, Inc. (the Company) is engaged in the development, manufacture and
distribution of proprietary x-ray and other medical systems.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain accounting policies as described in this note and elsewhere in the
accompanying consolidated financial statements.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and all of its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
(b) Change in Fiscal Year
During fiscal 1993, the Company elected to change its fiscal year-end from
September 30 to the last Saturday in September. Fiscal 1993, 1994 and 1995
ended on September 25, 1993, September 24, 1994 and September 30, 1995.
(c) Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Cash and Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments with maturities of three
months or less at the time of acquisition to be cash equivalents. Included in
cash equivalents at September 24, 1994 is approximately $4,804,000 of
securities purchased under agreements to resell. Included in cash equivalents
at September 30, 1995 is approximately $4,217,000 of securities purchased
under agreements to resell. The securities purchased under agreements to
resell are collateralized by U.S. Government securities. Short-term
investments have maturities of greater than three months and consist of
securities issued by the U.S. Government and its agencies.
The Company accounts for investments in accordance with the Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under SFAS No. 115, investments
that the Company has the positive intent and ability to hold to maturity are
reported at amortized cost, which approximates fair market value, and are
classified as held-to-maturity. These investments include cash, cash
equivalents and securities issued by U.S. Government agencies, which total
$6,522,000 at September 30, 1995. Investments purchased to be held for
indefinite periods of time and not intended at the time of purchase to be held
until maturity are classified as available-for-sale, which total $1,803,000 at
September 30, 1995. These investments consist of securities issued by the U.S.
Government and are carried at cost which approximates fair market value.
F-7
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(e) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentration of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. Financial instruments that subject the Company to credit risk
consist primarily of trade accounts receivable. The Company utilizes
distributors in certain countries with various credit terms, depending on the
individual circumstances. One distributor had amounts due to the Company of
approximately $4,817,000 and $2,231,000 as of September 24, 1994 and September
30, 1995, respectively. This distributor accounted for 14%, 28% and 20% of
product sales for fiscal 1993, 1994 and 1995, respectively.
(f) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 30,
1994 1995
------------- -------------
<S> <C> <C>
Raw materials and work-in-process............. $3,258,076 $4,030,275
Finished goods................................ 1,176,957 2,886,725
---------- ----------
$4,435,033 $6,917,000
========== ==========
</TABLE>
Work-in-process and finished goods inventories consist of materials, labor
and manufacturing overhead.
(g) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations, using the straight-line and declining-balance methods, which
allocate the cost of property and equipment over the following estimated
useful lives:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
-------------------- -------------
<S> <C>
Equipment.................. 5 Years
Furniture and fixtures..... 5-7 Years
Leasehold improvements..... Life of lease
</TABLE>
(h) Intangible Assets
The Company assesses the realizability of intangible assets in accordance
with SFAS No. 121, Accounting for Impairment of Long-lived Assets and for
Long-lived Assets To Be Disposed Of.
(i) Foreign Currency Translation
The Company translates certain of its accounts and the financial statements
of its foreign subsidiaries in accordance with SFAS No. 52, Foreign Currency
Translation. In translating the accounts of the foreign subsidiaries into U.S.
dollars, assets and liabilities are translated at the rate of exchange in
effect at year-end, while stockholders' equity is translated at historical
rates. Revenue and expense accounts are translated using the weighted average
exchange rate in effect during the year. Gains and losses from foreign
currency translation are credited or charged to cumulative translation
adjustment, included in stockholders' equity in the accompanying consolidated
balance sheets.
Transaction losses of approximately $430,000 in fiscal 1993 are included in
other expense in the accompanying consolidated statements of operations.
Transaction gains in fiscal 1994 and 1995 were not significant.
F-8
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(j) Revenue Recognition
The Company recognizes product revenue upon shipment. A provision is made at
that time for estimated warranty costs to be incurred. Other revenues are
recorded at the time the product is shipped or the service rendered.
Maintenance revenues are recognized over the term of the contract. Cash
received in excess of revenues recognized is included in deferred revenue in
the accompanying consolidated balance sheets.
(k) Research and Development and Software Development Costs
Research and development costs, other than software development costs, have
been charged to operations as incurred. SFAS No. 86, Accounting for the Costs
of Computer Software To Be Sold, Leased or Otherwise Marketed, requires the
capitalization of certain computer software development costs incurred after
technological feasibility is established. The Company believes that once
technological feasibility of a software product has been established, the
additional development costs incurred to bring the product to a commercially
acceptable level are not significant.
(l) Net Income (Loss) per Common and Common Equivalent Share
Net income (loss) per share data are computed using the weighted average
number of shares of common stock outstanding during each period. Common
equivalent shares from stock options have been included in the computation
using the treasury stock method only when their effect would be dilutive.
Fully dilutive net income per share has been separately presented only when
the difference from primary net income per share is significant.
(m) Restructuring Charge
In fiscal 1993, the Company recorded a nonrecurring restructuring charge of
$900,000, representing the costs associated with reorganizing its European
operations. These costs included a reduction in work force, consolidation of
distribution and administrative functions, and asset write-offs and write-
downs. The restructuring was completed during the fourth quarter of fiscal
1994.
(n) Derivative Financial Instruments
During October 1994, the Financial Accounting Standards Board issued SFAS
No. 119, Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments, which requires disclosures about derivative financial
instruments. SFAS No. 119 will be effective for fiscal 1996. The Company does
not expect the adoption of this standard to have a material effect on its
consolidated financial position or results of operations. At September 30,
1995, the Company had no instruments requiring disclosure under SFAS No. 119.
(3) LINE OF CREDIT
The Company maintains a line of credit with a bank for the equivalent of
$3,000,000, which bears interest at the Paris Interbank Offered Rate (6.375%
at September 30, 1995) plus 2.25%. The borrowings under this line are
primarily used by the Company's European subsidiaries to settle intercompany
sales and are denominated in the respective local currencies of its European
subsidiaries. The line of credit may be canceled by the bank with a 30-day
notice. Interest expense on this line of credit of approximately $79,000 and
$204,000 has been included in other expenses in the accompanying consolidated
statements of operations for 1994 and 1995, respectively.
F-9
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) INCOME TAXES
The Company provides for income taxes under the liability method in
accordance with SFAS No. 109, Accounting for Income Taxes.
The provision (benefit) for income taxes in the accompanying consolidated
statements of operations consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Federal--
Current....................... $(295,000) $1,395,000 $415,000
Deferred...................... (15,000) (105,000) 135,000
--------- ---------- --------
(310,000) 1,290,000 550,000
--------- ---------- --------
State--
Current....................... 10,000 45,000 90,000
--------- ---------- --------
Foreign--
Current....................... -- -- 10,000
--------- ---------- --------
$(300,000) $1,335,000 $650,000
========= ========== ========
</TABLE>
A reconciliation of the federal statutory rate to the Company's effective
tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Income tax provision (benefit) at
federal statutory rate.............. (34.0)% 34.0% 34.0%
Increase (decrease) in tax resulting
from--
Net effect of (income) losses of
foreign subsidiaries not
(provided) benefited.............. 20.5 (0.9) (6.7)
State tax provision, net of federal
benefit........................... 0.3 0.7 2.4
Research and development tax
credit............................ (1.3) (0.5) (1.9)
Effect of not providing U.S. taxes
on exempt FSC income.............. (3.5) (4.5) (5.3)
Other.............................. 3.5 2.0 3.3
----- ---- ----
Effective tax rate................... (14.5)% 30.8% 25.8%
===== ==== ====
</TABLE>
The components of domestic and foreign income (loss) before the provision
for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Domestic........................ $ (823,792) $4,211,439 $1,988,346
Foreign......................... (1,251,048) 118,738 531,173
----------- ---------- ----------
$(2,074,840) $4,330,177 $2,519,519
=========== ========== ==========
</TABLE>
During fiscal 1994 and 1995, the Company realized tax benefits of
approximately $200,000 and $280,000, respectively, relating to the exercise of
certain stock options. These benefits are reflected as a component of capital
in excess of par value.
F-10
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred tax amount recognized in the accompanying
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 30,
1994 1995
------------- -------------
<S> <C> <C>
Deferred tax assets........................... $1,450,000 $1,175,000
Valuation allowance........................... (696,000) (488,000)
---------- ----------
$ 754,000 $ 687,000
========== ==========
</TABLE>
The approximate income tax effect of each type of temporary difference and
carryforward before allocation of the valuation allowance is approximately as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 30,
1994 1995
------------- -------------
<S> <C> <C>
Foreign net operating loss carryforwards..... $ 561,000 $ 353,000
Nondeductible accruals....................... 389,000 290,000
Nondeductible reserves....................... 496,000 511,000
Other temporary differences.................. 4,000 21,000
---------- ----------
$1,450,000 $1,175,000
========== ==========
</TABLE>
The valuation allowance relates primarily to certain deferred tax assets in
foreign jurisdictions, for which realization is uncertain. The reduction in
the valuation allowance in 1995 is directly attributable to the reduction of
foreign net operating losses.
(5) COMMON STOCK
(a) Stock Option Plans
The Company's 1986 Combination Stock Option Plan (the 1986 Plan) is
administered by the Board of Directors and authorizes the Company to issue
options to purchase up to 950,000 shares that have been reserved by the
Company. Under the terms of the 1986 Plan, the Company may grant employees
either incentive stock options or nonqualified stock options to purchase
shares of the Company's common stock at a price not less than fair market
value at the date of grant. In addition, the Company may grant nonqualified
options to other participants. As of September 30, 1995, the Company had
granted options to purchase 927,502 shares, of which options to purchase
345,819 shares had been exercised. These options vest over a five-year period
and are exercisable at varying dates.
The Company's 1990 Nonemployee Director Stock Option Plan (the Directors'
Plan) allows for eligible directors to receive options to purchase 5,000
shares of common stock upon election as a director. The options vest ratably
over a five-year period. In addition, eligible directors are entitled to
annual option grants to purchase 2,000 shares of common stock, which vest
after six months. Option grants under the Directors' Plan are at not less than
fair market value on the date of grant. The Company has reserved 75,000 shares
of common stock for issuance under the Directors' Plan. As of September 30,
1995, the Company had granted options to purchase 35,000 shares, of which
options to purchase 7,000 shares had been exercised.
In June 1995, the Board of Directors adopted, subject to stockholders'
approval, the 1995 Combination Stock Option Plan, pursuant to which the
Company is authorized to issue 550,000 options to purchase shares. Pending
stockholder approval, the Company had granted 275,000 options under this plan.
F-11
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes all stock option activity under the 1986 and
1995 Plans and the Directors' Plan for the three years ended September 30,
1995.
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE
OF SHARES PER SHARE
--------- --------------
<S> <C> <C>
Outstanding, September 30, 1992................. 297,413 $ .10-$22.75
Granted....................................... 252,450 4.38- 5.63
Terminated.................................... (164,363) .10- 22.75
Exercised..................................... (13,850) .10- 1.00
-------- -------------
Outstanding, September 25, 1993................. 371,650 .10- 17.75
Granted....................................... 303,400 3.63- 10.50
Terminated.................................... (13,185) 1.00- 7.38
Exercised..................................... (78,164) .10- 8.50
-------- -------------
Outstanding, September 24, 1994................. 583,701 .10- 17.75
Granted....................................... 373,300 12.38- 18.88
Terminated.................................... (7,600) 3.88- 14.13
Exercised..................................... (64,718) .10- 14.13
-------- -------------
Outstanding, September 30, 1995................. 884,683 $ .10-$18.88
======== =============
Exercisable, September 30, 1995................. 234,733 $ .10-$14.13
======== =============
</TABLE>
(b) Employee Stock Purchase Plan
In December 1994, the Company adopted the 1995 Employee Stock Purchase Plan
(the ESP Plan) in compliance with Section 423 of the Internal Revenue Code.
Employees who have completed 12 consecutive months or two years, whether or
not consecutive, of employment with the Company are eligible to participate in
the ESP Plan. The ESP Plan allows participants to purchase common stock of the
Company at 85% of the fair market value, as defined. The Company may issue up
to 100,000 shares under the ESP Plan. During fiscal 1995, the Company issued
4,780 shares under the ESP Plan. At September 30, 1995, the Company has 95,220
shares available for purchase under the ESP Plan.
(c) Rights Agreement
In December 1992, the Company adopted a shareholder rights plan. The plan is
intended to protect shareholders from unfair or coercive takeover practices.
In accordance with the plan, the Board of Directors declared a dividend
distribution of one common stock purchase right for each share of common stock
outstanding until the rights become detachable. Each right entitles the
registered holder to purchase from the Company one share of common stock for
$30, adjusted for certain events. In the event that the Company is acquired in
a merger or other business combination transaction or more than 50% of its
assets or earning power are sold, each holder shall thereafter have the right
to receive, upon exercise of each right, that number of shares of Common Stock
of the acquiring Company which at the time of such transaction would have a
market value of two times the $30 per share exercise price. The rights will
not be detachable or exercisable until certain events occur. The Board of
Directors may elect to terminate the rights under certain circumstances.
(6) PROFIT-SHARING 401(K) PLAN
The Company has a qualified profit-sharing plan covering substantially all
of its employees. Contributions to the plan are at the discretion of the
Company's Board of Directors. The Company has recorded approximately $98,000,
$120,000 and $135,000 as a provision for the profit-sharing contribution for
fiscal 1993, 1994 and 1995, respectively.
F-12
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) RELATED-PARTY TRANSACTIONS
(a) Management Services Agreement
The Company has an agreement with Vivid Technologies, Inc. (Vivid), an
affiliated company, whereby the Company provides management, administrative
and support services. In addition, the Company leases a portion of its
facilities to Vivid through June 1996 for approximately $15,000 per month.
Vivid pays the Company for all direct costs incurred, as well as a portion of
the Company's overhead costs, as defined, representing the pro rata portion of
costs attributable to Vivid. The Company has charged Vivid approximately
$304,000, $544,000 and $530,000 under the agreement during fiscal 1993, 1994
and 1995, respectively, which has been offset against operating expenses of
the Company. Vivid also purchased approximately $154,000, $229,000 and
$210,000 of inventory and spare parts from the Company in fiscal 1993, 1994
and 1995, respectively. Of these amounts, approximately $291,000 and $463,000
was unpaid as of September 24, 1994 and September 30, 1995, respectively.
(b) License and Technology Agreement
The Company has an agreement with Vivid whereby Vivid obtained a perpetual,
exclusive worldwide license to utilize certain of the Company's technology and
patents for the sole purpose of developing baggage and inspection security
systems. Royalty payments to the Company under the agreement are 5% of product
revenue on Vivid's first $50 million in sales; thereafter, payments are 3% of
Vivid's sales up to $200 million. No royalty payments will be made on
aggregate revenues in excess of $200 million. The agreement terminates by
mutual agreement of the two parties or under certain other circumstances, as
defined. The Company recognized approximately $138,000, $688,000 and $719,000
of royalty revenue under the agreement for fiscal 1993, 1994 and 1995,
respectively. Approximately $189,000 and $351,000 was outstanding at September
24, 1994 and September 30, 1995, respectively.
(8) COMMITMENTS
(a) Operating Leases
The Company and its subsidiaries lease certain equipment and conduct their
operations in leased facilities under operating lease agreements that expire
through fiscal 2002. In addition, the facility lease requires the Company to
pay a percentage of real estate taxes and certain operating costs of the
property. Future minimum lease payments under the operating leases are
approximately as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AMOUNT
------------------ ----------
<S> <C>
September 28, 1996............ $ 890,000
September 27, 1997............ 811,000
September 26, 1998............ 775,000
September 25, 1999............ 760,000
September 24, 2000............ 760,000
Thereafter.................... 931,000
----------
$4,927,000
==========
</TABLE>
Rental expense, net of subrentals from Vivid, was approximately $784,000,
$647,000 and $632,000 for fiscal 1993, 1994 and 1995, respectively.
The lease agreement for the Company's headquarters included a free rent and
reduced rent period. The Company is recognizing the rent expense evenly over
the term of the lease agreement.
F-13
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) Patent Acquisition
In fiscal 1992, the Company acquired certain patents pertaining to
technology incorporated into certain of the Company's products. The Company
paid approximately $245,000 for these patents and related expenses upon
entering into the agreement. In May 1993, this agreement was amended such that
the Company paid approximately $344,000 for additional patent rights and
related expenses, of which $50,000 was paid through the issuance of 10,667
shares of common stock. The Company may be required to make additional
payments of common stock (up to a maximum of 32,000 shares) for certain
additional patent rights, if and when available. The cost of these patents are
being amortized over their expected life of 10 years.
(9) COLLABORATION AGREEMENT
In June 1995, the Company acquired a 5% minority interest in a collaborating
company. To acquire this minority interest, the Company issued 28,021 shares
of common stock and paid $75,912 in cash in return for all of the outstanding
convertible preferred stock of the collaborating company. The Company also
entered into a development agreement with the collaborating company related to
a certain product. As part of the development agreement, the Company will
reimburse the collaborating company for expenses incurred in the development
of this product. In order to maintain its exclusive rights in the
collaborating company's technology, the Company must meet required sales
volumes, as defined, in the five years commencing 90 days after approval of
the product by the Food and Drug Administration. The Company is also required
to pay royalties to the collaborating company based on net sales of the
product, as defined.
(10) FEE PER SCAN PROGRAM
The Company has entered into a strategic fee per scan program with a leasing
company whereby the Company sells its systems to the leasing company, which in
turn, leases the systems to third parties. Under the terms of the agreement,
the Company is contingently liable for a certain amount per system, up to a
maximum of $500,000. At September 30, 1995, the Company was liable for
approximately $89,000. A portion of the program is guaranteed by a third
party.
(11) GEOGRAPHIC INFORMATION
Revenues, net income (loss) and identifiable assets for the Company's U.S.
and European operations are summarized as follows:
<TABLE>
<CAPTION>
1993
-----------------------------------------------------
UNITED EUROPEAN
STATES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers................. $15,997,129 $ 8,851,267 $ -- $24,848,396
Transfers between
geographic areas.......... 4,398,089 588,631 (4,986,720) --
----------- ----------- ----------- -----------
Total revenues......... $20,395,218 $ 9,439,898 $(4,986,720) $24,848,396
=========== =========== =========== ===========
Net loss................... $ (404,526) $(1,251,048) $ (119,266) $(1,774,840)
=========== =========== =========== ===========
Identifiable assets........ $19,264,066 $ 4,001,885 $(1,099,827) $22,166,124
=========== =========== =========== ===========
</TABLE>
F-14
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1994
---------------------------------------------------
UNITED EUROPEAN
STATES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers.................. $29,646,443 $ 8,837,300 $ -- $38,483,743
Transfers between geographic
areas...................... 2,833,417 1,452,712 (4,286,129) --
----------- ----------- ----------- -----------
Total revenues.......... $32,479,860 $10,290,012 $(4,286,129) $38,483,743
=========== =========== =========== ===========
Net income.................. $ 2,869,578 $ 118,738 $ 6,861 $ 2,995,177
=========== =========== =========== ===========
Identifiable assets......... $24,698,626 $ 5,091,193 $(1,292,657) $28,497,162
=========== =========== =========== ===========
<CAPTION>
1995
---------------------------------------------------
UNITED EUROPEAN
STATES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated
customers.................. $31,249,364 $12,150,486 $ -- $43,399,850
Transfers between geographic
areas...................... 4,105,914 2,085,185 (6,191,099) --
----------- ----------- ----------- -----------
Total revenues.......... $35,355,278 $14,235,671 $(6,191,099) $43,399,850
=========== =========== =========== ===========
Net income (loss)........... $ 1,364,676 $ 519,941 $ (15,098) $ 1,869,519
=========== =========== =========== ===========
Identifiable assets......... $28,993,088 $ 6,353,095 $(1,484,170) $33,862,013
=========== =========== =========== ===========
</TABLE>
Export sales from the United States to unaffiliated customers primarily in
Europe and Asia during fiscal 1993, 1994 and 1995 totaled approximately
$8,944,000, $16,166,000 and $15,601,000, respectively.
Transfers between the Company and its European subsidiaries are generally
recorded at amounts similar to the prices paid by unaffiliated foreign dealers.
All intercompany profit is eliminated in consolidation.
Export product sales as a percentage of total product sales are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30,
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Europe.......................... 51% 31% 37%
Asia............................ 17 38 29
All others...................... 6 5 9
--- --- ---
74% 74% 75%
=== === ===
</TABLE>
(12) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 30,
1994 1995
------------- -------------
<S> <C> <C>
Accrued payroll and employee benefits......... $1,007,867 $ 869,752
Accrued income taxes.......................... 578,073 581,222
Accrued commissions........................... 511,330 914,259
Accrued legal................................. 250,000 586,738
Other accrued expenses........................ 1,127,212 1,013,779
---------- ----------
$3,474,482 $3,965,750
========== ==========
</TABLE>
F-15
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(13) LITIGATION
On September 7, 1994, Lunar Corporation (Lunar) filed a complaint in United
States District Court against the Company, alleging, among other things, that
two of the Company's patents are not valid and infringe on three of Lunar's
patents. The Company filed a counterclaim against Lunar with respect to the
infringement of two of the Company's patents and a declaration that certain of
Lunar's patents are invalid and unenforceable.
On November 22, 1995, the Company and Lunar executed a definitive agreement
settling all disputes between the parties. The agreement provides for the
cross-licensing of certain patent rights and continuing payments between the
parties related to future sales. The Company and Lunar have agreed not to
engage each other in patent litigation in the area of x-ray densitometry and
ultrasound for a ten-year period. Management believes that the financial terms
of this agreement will not have a material adverse effect on the Company's
financial position or results of operations.
On January 24, 1995, B.V. Optische Industrie de Oude Delft (Oldelft) filed
suit in the United States District Court against the Company seeking
unspecified treble damages, attorneys' fees and costs relating to a prior
patent dispute between the Company and Oldelft relating to equalization
radiography. Oldelft also seeks the court to declare the Company's United
States patent for equalization radiography technology invalid. In November
1992, the Company transferred to Konica Corporation its rights to the patents
and know-how incorporated in the Company's equalization radiography product
that was then under development. As a result of this transfer, the Company has
no products that are planned or under development using this technology.
Management believes that the outcome of this dispute will not have a material
adverse effect on the Company's financial position or results of operations.
(14) QUARTERLY INCOME STATEMENT INFORMATION (UNAUDITED)
The following table presents a summary of quarterly results of operations
for 1994 and 1995:
<TABLE>
<CAPTION>
1994
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue................... $ 7,647,423 $9,907,203 $10,948,026 $ 9,981,091
Net income...................... 413,415 873,989 1,195,525 512,248
Primary net income per common
and common equivalent share.... .10 .21 .28 .12
<CAPTION>
1995
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue................... $10,198,855 $9,031,119 $11,301,320 $12,868,556
Net income...................... 643,720 153,610 487,668 584,521
Primary net income per common
and common equivalent share.... .15 .03 .11 .13
</TABLE>
F-16
<PAGE>
QDR 4500 LATERAL IMAGE OF THE SPINE
[DESCRIPTION OF GRAPHIC MATERIAL] The Company's QDR bone
densitometers produce high-
A screen image of a lateral spine of resolution dual-energy X-ray
a post-menopausal woman taken by the scans. A common examination site
Company's QDR 4500 ACCLAIM bone is the fracture-prone spine.
densitometer, including data read-out. Numerous scientific articles have
established lateral bone
densitometry (using supine
positioning) as a highly precise
and more diagnostically sensitive
way to measure the spine than
conventional back-to-front
examinations.
QDR 4500 IMAGE OF THE HIP
The risk of hip fracture in women [DESCRIPTION OF GRAPHIC MATERIAL]
increases significantly after age
50. Up to one in every five hip A screen image of a hip of a post-
fracture patients may die within menopausal woman taken by the
one year of fracture; one in every Company's QDR 4500 ACCLAIM bone
four will require long-term care; densitometer, including data read-
and an even greater percentage out.
will never return to an
independent lifestyle. Early
diagnosis and intervention are key
to reducing the risk of fracture.
SAHARA CLINICAL BONE SONOMETER
[DESCRIPTION OF GRAPHIC MATERIAL] Sahara is a compact and portable
"dry" ultrasound system under
A picture of the Company's Sahara development. Sahara is being
ultrasound bone sonometer. designed as a low cost and easy-
to-use system for preliminary
assessment of bone mineral status
in a physician's office.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK TO WHICH
THIS PROSPECTUS RELATES, OR AN OFFER IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 9
Price Range of Common Stock............................................... 9
Dividend Policy........................................................... 9
Capitalization............................................................ 10
Selected Consolidated Financial Data...................................... 11
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 12
Business.................................................................. 18
Management................................................................ 34
Principal and Selling Stockholders........................................ 37
Description of Capital Stock.............................................. 38
Underwriting.............................................................. 41
Legal Matters............................................................. 42
Experts................................................................... 42
Available Information..................................................... 42
Incorporation of Certain Documents by Reference........................... 43
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,200,000 Shares
[LOGO OF HOLOGIC, INC.]
Common Stock
----------------
PROSPECTUS
----------------
Needham & Company, Inc.
Tucker Anthony
Incorporated
Adams, Harkness & Hill, Inc.
----------------
, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 19,691
NASD Filing Fee................................................. 6,210
Nasdaq National Market Listing Fee.............................. 17,500
Blue Sky Fees and Expenses...................................... 7,500*
Transfer Agent and Registrar Fees............................... 3,500*
Accounting Fees and Expenses.................................... 50,000*
Legal Fees and Expenses......................................... 125,000*
Printing and Engraving.......................................... 75,000*
Miscellaneous................................................... 45,599*
--------
Total....................................................... $350,000*
========
</TABLE>
- --------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 10 of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the Company or its stockholders for
monetary damages for breach of fiduciary duty to the extent permitted by
Delaware law. Article VII of the Company's By-Laws provides that the Company
shall indemnify its officers and directors to the extent permitted by Delaware
General Corporation Law. Section 145 of the Delaware General Corporation Law
authorizes a corporation to indemnify directors, officers, employees or agents
of the corporation if such party acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, as determined in
accordance with the Delaware General Corporation Law. Section 145 further
provides that indemnification shall be provided if the party in question is
successful on the merits or otherwise. The Company has also entered into
indemnification agreements with each of its directors. The indemnification
agreements are intended to provide the maximum protection permitted by
Delaware law with respect to indemnification of directors. The Company may
also enter into similar agreements with certain of its officers who are not
also directors. The effect of these provisions is to permit indemnification by
the Company for liabilities arising under the Securities Act of 1933, as
amended. The Company also maintains directors and officers liability
insurance.
Reference is hereby made to Section 7 of the Underwriting Agreement between
the Company and the Underwriters, filed as Exhibit 1.01 to this Registration
Statement, for a description of indemnification arrangements between the
Company and the Underwriters.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REFERENCE
------- ---------
<C> <S> <C>
1.01 Form of Underwriting Agreement...........................
2.01 Merger Agreement between the Registrant and its
Massachusetts predecessor............................... A
3.01 Certificate of Incorporation of the Registrant........... A
4.01 Specimen certificate for shares of the Registrant's
Common Stock............................................ A
4.02 Description of capital stock (contained in the
Certificate of Incorporation of the Registrant filed as
Exhibit 3.01)........................................... A
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REFERENCE
------- ---------
<C> <S> <C>
4.03 Rights Agreement dated December 22, 1992................ B
4.04 Amendment No. 1 to the Rights Agreement dated December
22, 1992...............................................
5.01 Opinion of Brown, Rudnick, Freed & Gesmer...............
23.01 Consent of Arthur Andersen LLP..........................
23.02 Consent of Brown, Rudnick, Freed & Gesmer (included in
Exhibit 5.01)..........................................
24.01 Power of Attorney (set forth on page II-3)..............
</TABLE>
- --------
A. The above exhibits were previously filed as an exhibit of the same number
to the Registrant's Registration Statement on Form S-1 (Registration No.
33-33128) filed on January 24, 1990 and are incorporated herein by
reference.
B. The above exhibit was previously filed as an exhibit of the same number to
the Registrant's 1992 Annual Report on Form 10-K and is incorporated herein
by reference.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
initial bona fide offering thereof.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Waltham, Commonwealth of Massachusetts, on December
14, 1995.
HOLOGIC, INC.
/s/ S. David Ellenbogen
By: _________________________________
S. DAVID ELLENBOGEN
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints S. David Ellenbogen, Glenn P. Muir and Jay A.
Stein, and each of them (with full power to each of them to act alone), his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, and, in
connection with any registration of additional securities pursuant to Rule
462(b) under the Securities Act of 1933, to sign any abbreviated registration
statement and any and all amendments thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, in each case,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ S. David Ellenbogen Director and Principal December 14, 1995
____________________________________ Executive Officer
S. DAVID ELLENBOGEN
/s/ Glenn P. Muir Principal Financial and December 14, 1995
____________________________________ Accounting Officer
GLENN P. MUIR
/s/ Irwin Jacobs Director December 14, 1995
____________________________________
IRWIN JACOBS
Director December , 1995
____________________________________
WILLIAM A. PECK
/s/ Gerald Segel Director December 14, 1995
____________________________________
GERALD SEGEL
/s/ Jay A. Stein Director December 14, 1995
____________________________________
JAY A. STEIN
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REFERENCE PAGE
------- --------- ----
<C> <S> <C> <C>
1.01 Form of Underwriting Agreement.....................
2.01 Merger Agreement between the Registrant and its
Massachusetts predecessor......................... A
3.01 Certificate of Incorporation of the Registrant..... A
4.01 Specimen certificate for shares of the Registrant's
Common Stock...................................... A
4.02 Description of capital stock (contained in the
Certificate of Incorporation of the Registrant
filed as Exhibit 3.01)............................ A
4.03 Rights Agreement dated December 22, 1992........... B
4.04 Amendment No. 1 to the Rights Agreement dated
December 22, 1992.................................
5.01 Opinion of Brown, Rudnick, Freed & Gesmer..........
23.01 Consent of Arthur Andersen LLP.....................
23.02 Consent of Brown, Rudnick, Freed & Gesmer (included
in Exhibit 5.01)..................................
24.01 Power of Attorney (set forth on page II-3).........
</TABLE>
- --------
A. The above exhibits were previously filed as an exhibit of the same number
to the Registrant's Registration Statement on Form S-1 (Registration No.
33-33128) filed on January 24, 1990 and are incorporated herein by
reference.
B. The above exhibit was previously filed as an exhibit of the same number to
the Registrant's 1992 Annual Report on Form 10-K and are incorporated
herein by reference.
<PAGE>
TH&T DRAFT 12/14/95
1,200,000 SHARES/1/
HOLOGIC, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
NEEDHAM & COMPANY, INC. January ___, 1996
TUCKER ANTHONY INCORPORATED
ADAMS, HARKNESS & HILL, INC.
As Representatives of the several Underwriters
c/o Needham & Company, Inc.
400 Park Avenue
New York, New York 10022
Ladies and Gentlemen:
Hologic, Inc., a Delaware corporation (the "Company"), proposes to sell
1,200,000 shares (the "Firm Shares") of the Company's Common Stock, $.01 par
value per share (the "Common Stock"), to you and to the several other
Underwriters named in Schedule I (collectively, the "Underwriters"), for whom
you are acting as representatives (the "Representatives"). The Company and the
persons named in Schedule II (the "Selling Stockholders") have agreed to grant
to you and to the other Underwriters an option (the "Option") to purchase up to
an additional 180,000 shares of Common Stock (the "Option Shares"), of which
46,000 shares are to be issued and sold by the Company and an aggregate of
134,000 shares are to be sold by the Selling Stockholders which are to be sold
in the respective amounts set forth opposite their respective names in Schedule
II, on the terms and for the purposes set forth in Section 1(b) hereof. The Firm
Shares and the Option Shares are referred to collectively herein as the
"Shares." Each Selling Stockholder has executed and delivered a Custody
Agreement (each a "Custody Agreement") and an Irrevocable Power of Attorney
(each a "Power of Attorney") pursuant to which each Selling Stockholder has
placed his Shares in custody and appointed the persons designated therein as the
attorneys (the "Attorneys") with authority to execute and deliver this Agreement
on behalf of such Selling Stockholder and to take certain other actions with
respect thereto and hereto.
- ------------------
/1/Plus an option to purchase up to an additional 180,000 shares to cover over-
allotments.
<PAGE>
The Company and the Selling Stockholders confirm as follows their
respective agreement with the Representatives and the several other
Underwriters.
1. Agreement to Sell and Purchase.
(a) The Company agrees to sell to each Underwriter named below, and
upon the basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and conditions of
this Agreement, each Underwriter agrees, severally and not jointly, to
purchase from the Company, the respective number of Firm Shares set forth
opposite its name on Schedule I, at the purchase price of $___ for each
Firm Share.
(b) Subject to all the terms and conditions of this Agreement, the
Company and the Selling Stockholders, severally and not jointly, grant the
Option, in the respective amounts set forth above and in Schedule II, to
the several Underwriters to purchase, severally and not jointly, up to the
maximum number of Option Shares from the Company and the Selling
Stockholders at the same price per share as the Underwriters shall pay for
the Firm Shares. The Option may be exercised only to cover over-allotments
in the sale of the Firm Shares by the Underwriters and may be exercised in
whole or in part at any time (but not more than once) on or before the 30th
day after the date of this Agreement upon written or telegraphic notice
(the "Option Shares Notice") by the Representatives to the Company no later
than 12:00 noon, Eastern time, at least two and no more than five business
days before the date specified for closing in the Option Shares Notice (the
"Option Closing Date") setting forth the aggregate number of Option Shares
to be purchased and the time and date for such purchase. On the Option
Closing Date, the Company will issue and sell, and the Selling Stockholders
will sell to the Underwriters the number of Option Shares set forth in the
Option Shares Notice (to be allocated, if the Option is exercised in part
only, pro rata among them based on the maximum number of Option Shares that
may be sold by them), and each Underwriter will purchase, upon the basis of
the representations, warranties and agreements of the Company and the
Selling Stockholders herein contained, such percentage of the Option Shares
as is equal to the percentage of Firm Shares that such Underwriter is
purchasing, as adjusted by the Representatives in such manner as they deem
advisable to avoid fractional shares.
2. Delivery and Payment. Delivery of the Firm Shares shall be made to the
Representatives for the accounts of the Underwriters against payment of the
purchase price by certified or official bank check payable in New York Clearing
House (next-day) funds to the order of the Company at the office of Needham &
Company, Inc., 400 Park Avenue, New York, New York 10022, at 10:00 a.m., Eastern
time, on the [fourth] business day following the date of this Agreement, or at
such time on such other date, not later than seven business days after the date
of
-2-
<PAGE>
this Agreement, as may be agreed upon by the Company and the Representatives
(such date being hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option Shares,
against payment by the Underwriters (in the manner specified above) to the
Company for the Option Shares to be sold by it and to the Company as custodian
for the Selling Stockholders (the "Custodian") for the Option Shares to be sold
by the Selling Stockholders, will take place at the office specified above for
the Closing Date at the time and date (which may be the Closing Date) specified
in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and shall be
registered in such names and in such denominations as the Representatives shall
request at least two business days prior to the Closing Date or the Option
Closing Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date or the Option Closing Date, as the case may
be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and the Option Shares by the Company to
the respective Underwriters shall be borne by the Company. The cost of tax
stamps, if any, in connection with the sale of Option Shares by the Selling
Stockholders shall be borne by the Selling Stockholders. The Company and the
Selling Stockholders will pay and save each Underwriter and any subsequent
holder of the Shares harmless from any and all liabilities with respect to or
resulting from any failure or delay in paying Federal and state stamp and other
transfer taxes, if any, which may be payable or determined to be payable in
connection with the original issuance or sale to such Underwriter of the Firm
Shares and Option Shares sold by it or them.
3. Representations and Warranties of the Company. The Company represents,
warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement (Registration No. 33-_____) on Form S-3 relating to
the Shares, including a preliminary prospectus and such amendments to such
registration statement as may have been required to the date of this
Agreement, has been prepared by the Company under the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (collectively referred to as the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder, and
has been filed with the Commission. The term "preliminary prospectus" as
used herein means a preliminary prospectus as contemplated by Rule 430 or
Rule 430A of the Rules and Regulations included at any time as part of the
registration statement. Copies of such registration statement and
amendments and of each related preliminary prospectus have been delivered
-3-
<PAGE>
to the Representatives. If such registration statement has not become
effective, a further amendment to such registration statement, including a
form of final prospectus, necessary to permit such registration statement
to become effective will be filed promptly by the Company with the
Commission. If such registration statement has become effective, a final
prospectus containing information permitted to be omitted at the time of
effectiveness by Rule 430A of the Rules and Regulations will be filed
promptly by the Company with the Commission in accordance with Rule 424(b)
of the Rules and Regulations. The term "Registration Statement" means the
registration statement as amended at the time it becomes or became
effective (the "Effective Date"), including financial statements and all
exhibits and any information deemed to be included therein by Rule 430A, if
applicable, together with any registration statement filed by the Company
pursuant to Rule 462(b) of the Rules and Regulations. The term
"Prospectus" means the prospectus as first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations or, if no such filing
is required, the form of final prospectus included in the Registration
Statement at the Effective Date. Any reference herein to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), on or before the
Effective Date or the date of such preliminary prospectus or the
Prospectus, as the case may be. Any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement, any
preliminary prospectus or the Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the
Effective Date, or the date of any preliminary prospectus or the
Prospectus, as the case may be, and deemed to be incorporated therein by
reference.
(b) No order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission. On the Effective Date, the
date the Prospectus is first filed with the Commission pursuant to Rule
424(b) (if required), at all times subsequent to and including the Closing
Date and, if later, the Option Closing Date and when any post-effective
amendment to the Registration Statement becomes effective or any amendment
or supplement to the Prospectus is filed with the Commission, the
Registration Statement and the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment or
supplement thereto), including the financial statements included or
incorporated by reference in the Prospectus, did or will comply with all
applicable provisions of the Act, the Exchange Act, the rules and
regulations thereunder (the "Exchange Act Rules and Regulations") and the
Rules and Regulations and will contain all statements required to be stated
therein in accordance with the Act, the Exchange Act, the Exchange Act
Rules and Regulations and the Rules and Regulations. On the Effective Date
and when any post-effective amendment to the Registration Statement becomes
effective, no part of the Registration Statement, the Prospectus or any
such amendment or supplement did or will contain an untrue statement of a
material fact
-4-
<PAGE>
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading. At the Effective
Date, the date the Prospectus or any amendment or supplement to the
Prospectus is filed with the Commission and at the Closing Date and, if
later, the Option Closing Date, the Prospectus did not or will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing representations
and warranties in this Section 3(b) do not apply to any statements or
omissions made in reliance on and in conformity with information relating
to any Underwriter furnished in writing to the Company by the
Representatives specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto. The Company acknowledges
that the statements set forth under the heading "Underwriting" in the
Prospectus constitute the only information relating to any Underwriter
furnished in writing to the Company by the Representatives specifically for
inclusion in the Registration Statement.
(c) The documents which are incorporated by reference in the
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, when they become effective or were filed with
the Commission, as the case may be, complied in all material respects with
the requirements of the Act or the Exchange Act, as applicable, the
Exchange Act Rules and Regulations and the Rules and Regulations; and any
documents so filed and incorporated by reference subsequent to the
Effective Date shall, when they are filed with the Commission, conform in
all material respects with the requirements of the Act and the Exchange
Act, as applicable, the Exchange Act Rules and Regulations and the Rules
and Regulations.
(d) The only subsidiaries (as defined in the Rules and Regulations) of
the Company are listed on Exhibit A hereto. The Company and each of its
subsidiaries is, and at the Closing Date will be, a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each of its subsidiaries
has, and at the Closing Date will have, full power and authority to conduct
all the activities conducted by it, to own or lease all the assets owned or
leased by it and to conduct its business as described in the Registration
Statement and the Prospectus. The Company and each of its subsidiaries is,
and at the Closing Date will be, duly licensed or qualified to do business
and in good standing as a foreign corporation in all jurisdictions in which
the nature of the activities conducted by it or the character of the assets
owned or leased by it makes such license or qualification necessary and
where the failure to be so licensed or qualified might materially and
adversely affect the Company or the business, properties, business
prospects, condition (financial or other) or results of operations of the
Company. The Company owns all of the outstanding capital stock of each of
its subsidiaries, free and clear of all claims, liens, charges and
encumbrances. Complete and correct copies of the corporate charters and of
the by-laws of the Company and each of its
-5-
<PAGE>
subsidiaries and all amendments thereto have been delivered to the
Representatives, and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date or, if later, the Option Closing Date.
(e) All of the outstanding shares of capital stock of the Company have
been duly authorized, validly issued and are fully paid and nonassessable;
the Shares have been duly authorized and when issued and paid for as
contemplated herein will be validly issued, fully paid and nonassessable;
no preemptive or similar rights with respect to any of the Shares or the
issue and sale thereof and, as of each of the Closing Date and the Option
Closing Date, as applicable, no preemptive or similar rights will exist
with respect to any shares of the Company's capital stock. The description
of the capital stock of the Company in the Registration Statement and the
Prospectus is, and at each of the Closing Date and the Option Closing Date,
as applicable, will be, complete and accurate in all respects. Except as
set forth in the Prospectus, neither the Company nor any of its
subsidiaries has outstanding, and at each of the Closing Date and the
Option Closing Date, as applicable, will not have outstanding, any options
to purchase, or any rights or warrants to subscribe for, or any securities
or obligations convertible into, or any contracts or commitments to issue
or sell, any shares of capital stock, or any such warrants, convertible
securities or obligations. All of the outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized, validly issued
and are fully paid and nonassessable; and are held of record and
beneficially by the Company, free and clear of all claims, liens, charges
and encumbrances.
(f) The financial statements and schedules included or incorporated by
reference in the Registration Statement or the Prospectus present fairly
the financial condition of the Company and its subsidiaries as of the
respective dates thereof and the results of operations and cash flows of
the Company and its subsidiaries for the respective periods covered
thereby, all in conformity with generally accepted accounting principles
applied on a consistent basis throughout the entire period involved, except
as otherwise disclosed in the Prospectus. No other financial statements or
schedules of the Company are required by the Act, the Exchange Act, the
Exchange Act Rules and Regulations or the Rules and Regulations to be
included in the Registration Statement or the Prospectus. Arthur Andersen
LLP (the "Accountants"), who have reported on such financial statements and
schedules, are independent accountants with respect to the Company as
required by the Act and the Rules and Regulations. The summary financial
and statistical data included in the Registration Statement present fairly
the information shown therein and have been compiled on a basis consistent
with the financial statements presented therein.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to each of
the Closing Date and the
-6-
<PAGE>
Option Closing Date, as applicable, except as set forth in, pursuant to
arrangements described in or contemplated by the Registration Statement and
the Prospectus, (i) there has not been and will not have been any change in
the capitalization of the Company, or any material adverse change in the
business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company or any of its
subsidiaries, arising for any reason whatsoever, (ii) neither the Company
nor any of its subsidiaries has incurred nor will any of them incur any
material liabilities or obligations, direct or contingent, nor has the
Company or any of its subsidiaries entered into nor will any of them enter
into any material transactions other than pursuant to this Agreement and
the transactions referred to herein and (iii) the Company has not and will
not have paid or declared any dividends or other distributions of any kind
on any class of its capital stock.
(h) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended.
(i) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or
threatened against or affecting the Company, any of its subsidiaries or any
of their officers in their capacity as such, before or by any Federal or
state court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling,
decision or finding might materially and adversely affect the Company, any
of its subsidiaries or the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company
or any of its subsidiaries.
(j) The Company and each subsidiary has, and at each of the Closing
Date and the Option Closing Date, as applicable, will have, performed all
its obligations required to be performed by it, and is not, and at each of
the Closing Date and the Option Closing Date, as applicable, will not be,
in default, under any contract or other instrument to which it is a party
or by which its property is bound or affected, which non-performance or
default might materially and adversely affect the Company, any of its
subsidiaries or the business, properties, business prospects, condition
(financial or other) or results of operations of the Company or any of its
subsidiaries. To the best knowledge of the Company, no other party under
any contract or other instrument to which it or any of its subsidiaries is
a party is in default in any respect thereunder, which default might
materially and adversely affect the Company, any of its subsidiaries or the
business, properties, business prospects, condition (financial or other) or
results of operations of the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries is, and at each of the Closing Date
and the Option Closing Date, as applicable, will be, in violation of any
provision of its certificate of incorporation or by-laws.
-7-
<PAGE>
(k) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for
the consummation by the Company of the transactions on its part
contemplated herein, except such as have been obtained or made under the
Act or the Rules and Regulations and such as may be required under state
securities or Blue Sky laws or the by-laws and rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
purchase and distribution by the Underwriters of the Shares to be sold by
the Company.
(l) The Company has full corporate power and authority to enter into
this Agreement and the Custody Agreements. This Agreement has been, and the
Custody Agreements when executed will be, duly authorized, executed and
delivered by the Company and constitutes, or when executed will constitute,
a valid and binding agreement of the Company and is, or when executed will
be, enforceable against the Company in accordance with the terms hereof and
thereof, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting the enforcement
of creditors' rights generally and the enforcement of the indemnification
and contribution provisions of this Agreement. The performance of this
Agreement and the Custody Agreements and the consummation of the
transactions contemplated hereby and thereby will not result in the
creation or imposition of any lien, charge or encumbrance upon any of the
assets of the Company or any of its subsidiaries pursuant to the terms or
provisions of, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of
any obligation under, the certificate of incorporation or by-laws of the
Company or any of its subsidiaries, any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, lease, contract or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company, any of its subsidiaries or any of their properties is
bound or affected, or violate or conflict with any judgment, ruling,
decree, order, statute, rule or regulation of any court or other
governmental agency or body applicable to the business or properties of the
Company or any of its subsidiaries.
(m) The Company or one of its subsidiaries has good and marketable
title to all properties and assets described in the Prospectus as owned by
them, free and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Prospectus or are not material to the
business of the Company or its subsidiaries. The Company or its
subsidiaries have valid, subsisting and enforceable leases for the
properties described in the Prospectus as leased by them.
(n) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration
-8-
<PAGE>
Statement which is not described or filed as required. All such contracts
to which the Company or any of its subsidiaries is a party have been duly
authorized, executed and delivered by the Company or one of its
subsidiaries, constitute valid and binding agreements of the Company or one
of its subsidiaries and are enforceable against the Company or one of its
subsidiaries in accordance with the terms thereof, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting the enforcement of creditors' rights generally.
(o) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required
by Section 6 of this Agreement to be delivered to the Representatives was
or will be, when made, inaccurate, untrue or incorrect.
(p) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action designed,
or which might reasonably be expected, to cause or result, under the Act or
otherwise, in, or which has constituted, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale
of the Shares.
(q) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement which rights have not been waived by the holder
thereof or are otherwise not applicable as of the date hereof, other than
any rights of the Selling Stockholders to register the Option Shares that
may be sold hereunder by them.
(r) The Company has filed an application to include the Shares on the
Nasdaq National Market ("Nasdaq"), and has received notification that the
inclusion has been approved, subject to notice of issuance of the Shares.
(s) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its subsidiaries have sufficient trademarks,
trade names, patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct their businesses as now conducted;
and the Company has no knowledge of any infringement by it or any of its
subsidiaries of trademark rights, trade name rights, patent rights, mask
works, copyrights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company or any of its
subsidiaries, or to the best of the Company's knowledge, any employee of
the Company or any of its subsidiaries, regarding trademark, trade name,
patent, mask work, copyright, license, trade secret or other infringement
which could have a material and adverse effect on the Company, any of its
subsidiaries or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company or any of
its subsidiaries.
-9-
<PAGE>
(t) The Company and each of its subsidiaries has filed all federal,
state and foreign income tax returns which have been required to be filed
and has paid all taxes and assessments received by them or any of them to
the extent that such taxes have become due.
(u) The Company or its subsidiaries own or possess all authorizations,
approvals, orders, licenses, registrations, other certificates and permits
of and from all governmental regulatory officials and bodies, necessary to
conduct their businesses as contemplated in the Prospectus except where the
failure to own or possess all such authorizations, approvals, orders,
licenses, registrations, other certificates and permits would not
materially and adversely affect the Company, any of its subsidiaries or the
business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company or any of its
subsidiaries; there is no proceeding pending or threatened (or any basis
therefor known to the Company) which may cause any such authorization,
approval, order, license, registration, certificate or permit to be
revoked, withdrawn, canceled, suspended or not renewed; and the Company and
each of its subsidiaries is conducting its business in compliance with all
laws, rules and regulations applicable thereto except where such
noncompliance would not materially and adversely affect the Company, any of
its subsidiaries or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company or any of
its subsidiaries.
4. Representations and Warranties of the Selling Stockholders. Each
Selling Stockholder, severally and not jointly, represents, warrants, and
covenants to each Underwriter that:
(a) Such Selling Stockholder has full power and authority to enter
into this Agreement, the Custody Agreement and the Power of Attorney. All
authorizations and consents necessary for the execution and delivery by
such Selling Stockholder of the Custody Agreement and Power of Attorney,
and for the execution of this Agreement on behalf of such Selling
Stockholder, have been given. Each of the Custody Agreement and Power of
Attorney and this Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and constitutes a
valid and binding agreement of such Selling Stockholder and is enforceable
against such Selling Stockholder in accordance with the terms thereof and
hereof.
(b) Such Selling Stockholder now has, and at the time of delivery
thereof hereunder will have, (i) good and marketable title to the Shares to
be sold by such Selling Stockholder hereunder, free and clear of all liens,
encumbrances and claims whatsoever (other than pursuant to the Custody
Agreement and the Power of Attorney), and (ii) full
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<PAGE>
legal right and power, and all authorizations and approvals required by
law, to sell, transfer and deliver such Shares to the Underwriters
hereunder and to make the representations, warranties and agreements made
by such Selling Stockholder herein. Upon the delivery of and payment for
such Shares hereunder, such Selling Stockholder will deliver good and
marketable title thereto, free and clear of all liens, encumbrances and
claims whatsoever.
(c) On the Option Closing Date, all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with
the sale and transfer of the Shares to be sold by such Selling Stockholder
to the several Underwriters hereunder will have been fully paid or provided
for by such Selling Stockholder and all laws imposing such taxes will have
been fully complied with.
(d) The performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of
such Selling Stockholder pursuant to the terms or provisions of, or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the acceleration of any obligation
under, if such Selling Stockholder is a corporation or partnership, the
organizational documents of such Selling Stockholder, or, as to all such
Selling Stockholders, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or instrument
to which such Selling Stockholder is a party or by which such Selling
Stockholder or any of its property is bound or affected, or under any
ruling, decree, judgment, order, statute, rule or regulation of any court
or other governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder.
(e) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for
the consummation by such Selling Stockholder of the transactions on its
part contemplated herein and in the Custody Agreement and Power of
Attorney, except such as have been obtained under the Act or the Rules and
Regulations and such as may be required under state securities or Blue Sky
laws or the by-laws and rules of the NASD in connection with the purchase
and distribution by the Underwriters of the Shares to be sold by such
Selling Stockholder.
(f) Such Selling Stockholder has no knowledge of any material fact or
condition not set forth in the Registration Statement or the Prospectus
which has adversely affected, or may adversely affect, the business,
properties, business prospects, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, and the sale of
the Shares proposed to be sold by such Selling Stockholder is not prompted
by any such knowledge.
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(g) All information with respect to such Selling Stockholder contained
in the Registration Statement and the Prospectus (as amended or
supplemented, if the Company shall have filed with the Commission any
amendment or supplement thereto) complied and will comply with all
applicable provisions of the Act and the Rules and Regulations, contains
and will contain all statements required to be stated therein in accordance
with the Act and the Rules and Regulations, and does not and will not
contain an 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 not misleading.
(h) To the knowledge of such Selling Stockholder, without conducting
an independent inquiry, the representations and warranties of the Company
contained in Section 3 are true and correct.
(i) Other than as permitted by the Act and the Rules and Regulations,
such Selling Stockholder has not distributed and will not distribute any
preliminary prospectus, the Prospectus or any other offering material in
connection with the offering and sale of the Shares. Such Selling
Stockholder has not taken, directly or indirectly, any action designed, or
which might reasonably be expected, to cause or result in, under the Act or
otherwise, or which has caused or resulted in, stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares.
(j) Certificates in negotiable form for the Option Shares to be sold
hereunder by such Selling Stockholders have been placed in custody, for the
purpose of making delivery of such Option Shares under this Agreement,
under the Custody Agreement which appoints the Company as Custodian for
each Selling Stockholder. Such Selling Stockholder agrees that the Shares
represented by the certificates held in custody for him under the Agreement
and Power of Attorney are for the benefit of and coupled with and subject
to the interest hereunder of the Custodian, the Attorneys, the
Underwriters, each other Selling Stockholder and the Company, that the
arrangements made by such Selling Stockholder for such custody and the
appointment of the Custodian and the Attorneys by such Selling Stockholder
are irrevocable, and that the obligations of such Selling Stockholder
hereunder shall not be terminated by operation of law, whether by the
death, disability, incapacity or liquidation of any Selling Stockholder or
the occurrence of any other event. If any Selling Stockholder should die,
become disabled or incapacitated or is liquidated or if any other such
event should occur before the delivery of the Shares hereunder,
certificates for the Shares shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement and actions
taken by the Attorneys and the Custodian pursuant to the Custody Agreement
and the Power of Attorney shall be as valid as if such death, liquidation,
incapacity or other event had not occurred, regardless of
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whether or not the Custodian or the Attorneys, or either of them, shall
have received notice thereof.
5. Agreements of the Company and the Selling Stockholders. The Company
and the Selling Stockholders (as to Section 5(j), (k), (n) and (o)) agree,
severally and not jointly, with the several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or
dealer, file any amendment or supplement to the Registration Statement or
the Prospectus, unless a copy thereof shall first have been submitted to
the Representatives within a reasonable period of time prior to the filing
thereof and the Representatives shall not have objected thereto.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representatives
promptly, and will confirm such advice in writing, (i) when the
Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, (ii) of any request by the Commission
for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose or the threat thereof, (iv) of the happening of any event during
the period mentioned in the second sentence of Section 5(e) that in the
judgment of the Company makes any statement made in the Registration
Statement or the Prospectus untrue or that requires the making of any
changes in the Registration Statement or the Prospectus in order to make
the statements therein, in light of the circumstances in which they are
made, not misleading and (v) of receipt by the Company or any
representative or attorney of the Company of any other communication from
the Commission relating to the Company, the Registration Statement, any
preliminary prospectus or the Prospectus. If at any time the Commission
shall issue any order suspending the effectiveness of the Registration
Statement, the Company will make every reasonable effort to obtain the
withdrawal of such order at the earliest possible moment. If the Company
has omitted any information from the Registration Statement pursuant to
Rule 430A of the Rules and Regulations, the Company will comply with the
provisions of and make all requisite filings with the Commission pursuant
to said Rule 430A and notify the Representatives promptly of all such
filings.
(c) The Company will furnish to each of the Representatives, without
charge, two signed copies of the Registration Statement and of any post-
effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representatives, without
charge, for transmittal to each of the other
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Underwriters, a copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules but without
exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver to each of the Underwriters, without charge, as many
copies of the Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request for the purposes contemplated by
this Agreement. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the several Underwriters and by all
dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for any period of time thereafter
during which the Prospectus is required by law to be delivered in
connection therewith. If during such period of time any event shall occur
which in the judgment of the Company or counsel to the Underwriters should
be set forth in the Prospectus in order to make any statement therein, in
the light of the circumstances under which it was made, not misleading, or
if it is necessary to supplement or amend the Prospectus to comply with
law, the Company will forthwith prepare and duly file with the Commission
an appropriate supplement or amendment thereto, and will deliver to each of
the Underwriters, without charge, such number of copies of such supplement
or amendment to the Prospectus as the Representatives may reasonably
request for the purposes contemplated by this Agreement. The Company shall
not file any document under the Exchange Act before the termination of the
offering of the Shares by the Underwriters if such document would be deemed
to be incorporated by reference into the Prospectus which is not approved
by the Representatives after reasonable notice thereof.
(f) Prior to any public offering of the Shares, the Company will
cooperate with the Representatives and counsel to the Underwriters in
connection with the registration or qualification of the Shares for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Representatives may request; provided, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
(g) The Company will, so long as required under the Rules and
Regulations, furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of operations, stockholders' equity and cash flow of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the
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Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail.
(h) During the period of five years commencing on the Effective Date,
the Company will furnish to the Representatives and each other Underwriter
who may so request copies of such financial statements and other periodic
and special reports as the Company may from time to time distribute
generally to the holders of any class of its capital stock, and will
furnish to the Representatives and each other Underwriter who may so
request a copy of each annual or other report it shall be required to file
with the Commission.
(i) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the
last day of the fifteenth full calendar month following the calendar
quarter in which the Effective Date falls, an earnings statement (which
need not be audited but shall be in reasonable detail) for a period of 12
months ended commencing after the Effective Date, and satisfying the
provisions of Section 11(a) of the Act (including Rule 158 of the Rules and
Regulations).
(j) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay, or
reimburse if paid by the Representatives, all costs and expenses incident
to the performance of the obligations of the Company and the Selling
Stockholders under this Agreement, including but not limited to costs and
expenses of or relating to (i) the preparation, printing and filing of the
Registration Statement and exhibits to it, each preliminary prospectus,
Prospectus and any amendment or supplement to the Registration Statement or
Prospectus, (ii) the preparation and delivery of certificates representing
the Shares, (iii) the printing of this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreements, any Underwriters'
Questionnaires or Powers of Attorney, the Custody Agreements and the Powers
of Attorney, (iv) furnishing (including costs of shipping and mailing) such
copies of the Registration Statement, the Prospectus and any preliminary
prospectus, and all amendments and supplements thereto, as may be requested
for use in connection with the offering and sale of the Shares by the
Underwriters or by dealers to whom Shares may be sold, (v) the quotation of
the Shares on Nasdaq, (vi) any filings required to be made by the
Underwriters with the NASD, and the fees, disbursements and other charges
of counsel for the Underwriters in connection therewith, (vii) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions designated pursuant to
Section 5(f), including the fees, disbursements and other out-of-pocket
expenses of counsel to the Underwriters in connection therewith, and the
preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (viii) fees, disbursements and other charges of counsel to the
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Company (but not those of counsel for the Underwriters, except as otherwise
provided herein) and (ix) the transfer agent for the Shares.
(k) If this Agreement shall be terminated by the Company or the
Selling Stockholders pursuant to any of the provisions hereof (otherwise
than pursuant to Section 9 hereof) or if for any reason the Company or any
Selling Stockholder shall be unable to perform its or his obligations
hereunder, the Company will reimburse the several Underwriters for all out-
of-pocket expenses (including the fees, disbursements and other charges of
counsel to the Underwriters) reasonably incurred by them in connection
herewith.
(l) The Company will not at any time, directly or indirectly, take any
action designed, or which might reasonably be expected, to cause or result
in, or which will constitute, stabilization of the price of the shares of
Common Stock to facilitate the sale or resale of any of the Shares.
(m) The Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds."
(n) The Company and the Selling Stockholders will not, and the Company
will cause each of its officers and directors to enter into agreements with
the Representatives to the effect that they will not, without the prior
written consent of Needham & Company, Inc., offer to sell, sell or
otherwise dispose of (or enter into any transaction which is designed to,
or could be expected to, result in the disposition by any person of),
directly or indirectly, any shares of Common Stock or rights to acquire
such shares (other than pursuant to employee stock option and purchase
plans described in the Prospectus), for a period of 180 days after the date
of the Prospectus.
(o) As soon as any Selling Stockholder is advised thereof, such
Selling Stockholder will advise the Representatives and confirm such advice
in writing, (i) of receipt by such Selling Stockholder, or by any
representative of such Selling Stockholder, of any communication from the
Commission relating to the Registration Statement, the Prospectus or any
preliminary prospectus, or any notice or order of the Commission relating
to the Company or any of the Selling Stockholders in connection with the
transactions contemplated by this Agreement and (ii) of the happening of
any event during the period from and after the Effective Date that in the
judgment of such Selling Stockholder makes any statement made in the
Registration Statement or the Prospectus untrue or that requires the making
of any changes in the Registration Statement or the Prospectus in order to
make the statements therein, in light of the circumstances in which they
were made, not misleading.
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<PAGE>
6. Conditions of the Obligations of the Underwriters. The obligations of
each Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Representatives not later than 5:00 p.m., Eastern
time, on the date of this Agreement or at such later date and time as shall
be consented to in writing by the Representatives, and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been
made.
(b)(i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
be pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or
registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such
authorities shall have been complied with to the satisfaction of the staff
of the Commission or such authorities and (iv) after the date hereof no
amendment or supplement to the Registration Statement or the Prospectus
shall have been filed unless a copy thereof was first submitted to the
Representatives and the Representatives do not object thereto in good
faith, and the Representatives shall have received certificates, dated the
Closing Date and the Option Closing Date and signed by the Chief Executive
Officer and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and
belief), to the effect of clauses (i), (ii) and (iii).
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business
prospects, properties, management, condition (financial or otherwise) or
results of operations of the Company or any of its subsidiaries, whether or
not arising from transactions in the ordinary course of business, in each
case other than as set forth in or contemplated by the Registration
Statement and the Prospectus and (ii) neither the Company nor any of its
subsidiaries shall have sustained any material loss or interference with
its business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any court
or legislative or other governmental action, order or decree, which is not
set forth in the Registration Statement and the Prospectus, if in the
judgment of the Representatives any such development makes it impracticable
or inadvisable to consummate the sale and delivery of the Shares by the
Underwriters at the public offering price.
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(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company, any of its
subsidiaries or any of their officers or directors in their capacities as
such, before or by any Federal, state or local court, commission,
regulatory body, administrative agency or other governmental body, domestic
or foreign, in which litigation or proceeding an unfavorable ruling,
decision or finding is not adequately covered by insurance and would, in
the judgment of the Representatives, materially and adversely affect the
business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company or any of its
subsidiaries.
(e) Each of the representations and warranties of the Company and the
Selling Stockholders contained herein shall be true and correct in all
material respects at the Closing Date and, with respect to the Option
Shares, at the Option Closing Date, except for changes in the ordinary
course of business or contemplated by the Registration Statement or
Prospectus, and all covenants and agreements contained herein to be
performed on the part of the Company and the Selling Stockholders and all
conditions contained herein to be fulfilled or complied with by the Company
and the Selling Stockholders at or prior to the Closing Date and, with
respect to the Option Shares, at or prior to the Option Closing Date, shall
have been duly performed, fulfilled or complied with.
(f) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing
Date, satisfactory in form and substance to the Representatives and counsel
for the Underwriters from Brown, Rudnick, Freed & Gesmer, P.C., counsel to
the Company and the Selling Stockholders, with respect to the matters set
forth in Annex A hereto.
(g) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing
Date, satisfactory in form and substance to the Representatives and counsel
for the Underwriters from __________, patent counsel to the Company, with
respect to the matters set forth in Annex B hereto.
(h) The Representatives shall have received an opinion, dated the
Closing Date and the Option Closing Date, from Testa, Hurwitz & Thibeault,
counsel to the Underwriters, with respect to the incorporation of the
Company, the validity of the Shares being delivered at such date, the
Registration Statement, the Prospectus and this Agreement, which opinion
shall be satisfactory in all respects to the Representatives.
(i) Concurrently with the execution and delivery of this Agreement,
the Accountants shall have furnished to the Representatives a letter, dated
the date of its
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delivery, addressed to the Representatives and in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants with respect to the Company as required by the Act and the
Rules and Regulations. At the Closing Date and, as to the Option Shares,
the Option Closing Date, the Accountants shall have furnished to the
Representatives a letter, dated the date of its delivery, which shall
reaffirm all of the statements made in their initial letter.
(j) Concurrently with the execution and delivery of this Agreement and
at the Closing Date and, as to the Option Shares, the Option Closing Date,
there shall be furnished to the Representatives an accurate certificate,
dated the date of its delivery, signed by each of the Chief Executive
Officer and the Chief Financial Officer of the Company, in form and
substance satisfactory to the Representatives, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus (including any documents filed
under the Exchange Act and deemed to be incorporated by reference into the
Prospectus) and (A) as of the date of such certificate, such documents are
true and correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not untrue or misleading and (B), in the case of the
certificate delivered at the Closing Date and the Option Closing Date,
since the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading, and there has been no document
required to be filed under the Exchange Act and the Exchange Act Rules and
Regulations that upon such filing would be deemed to be incorporated by
reference into the Prospectus that has not been so filed.
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the
time such certificate is delivered, true and correct, except for changes in
the ordinary course of business.
(iii) Each of the covenants required to be performed by the
Company herein on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be
satisfied or fulfilled on or prior to the date of such certificate has been
duly, timely and fully satisfied or fulfilled.
(k) Concurrently with the execution and delivery of this Agreement
and at the Option Closing Date, there shall have been furnished to the
Representatives an accurate certificate, dated the date of its delivery,
signed by the Attorneys on behalf of each of the Selling Stockholders, in
form and substance satisfactory to the Representatives, to the effect that
the representations and warranties of each of the Selling Stockholders
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contained herein are true and correct in all material respects on and as of
the date of such certificate as if made on and as of the date of such
certificate, and each of the covenants and conditions required herein to be
performed or complied with by the Selling Stockholders on or prior to the
date of such certificate has been duly, timely and fully performed or
complied with.
(l) On or prior to the Closing Date, the Representatives shall have
received the executed agreements referred to in Section 5(n).
(m) The Shares shall be qualified for sale in such jurisdictions as
the Representatives may reasonably request and each such qualification
shall be in effect and not subject to any stop order or other proceeding on
the Closing Date or the Option Closing Date.
(n) Prior to the Closing Date, the Shares shall have been duly
authorized for inclusion on Nasdaq upon official notice of issuance.
(o) The Company and the Selling Stockholders shall have furnished to
the Representatives such certificates, in addition to those specifically
mentioned herein, as the Representatives may have reasonably requested as
to the accuracy and completeness at the Closing Date and the Option Closing
Date of any statement in the Registration Statement or the Prospectus or
any documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus, as to the accuracy at the Closing Date and
the Option Closing Date of the representations and warranties of the
Company and the Selling Stockholders herein, as to the performance by the
Company and the Selling Stockholders of its and their respective
obligations hereunder, or as to the fulfillment of the conditions
concurrent and precedent to the obligations hereunder of the
Representatives.
7. Indemnification.
(a) Each of the Company and S. David Ellenbogen and Jay A. Stein (the
"Principal Selling Stockholders"), jointly and severally, will indemnify
and hold harmless each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person, if any, who controls each
Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, liabilities,
expenses and damages (including any and all investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted), to
which they, or any of them, may become subject under the Act, the Exchange
Act or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses
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or damages arise out of or are based on any untrue statement or alleged
untrue statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
or supplement to the Registration Statement or the Prospectus or in any
documents filed under the Exchange Act and deemed to be incorporated into
the Prospectus, or the omission or alleged omission to state in such
document a material fact required to be stated in it or necessary to make
the statements in it not misleading in light of the circumstances in which
they were made; provided that (i) the Company and the Principal Selling
Stockholders will not be liable to the extent that such loss, claim,
liability, expense or damage arises from the sale of the Shares in the
public offering to any person by an Underwriter and is based on an untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives on behalf of any
Underwriter expressly for inclusion in the Registration Statement, the
preliminary prospectus or the Prospectus; (ii) the Company and the
Principal Selling Stockholders will not be liable to any Underwriter, the
directors, officers, employees or agents of such Underwriter or any person
controlling such Underwriter with respect to any loss, claim, liability,
expense, charge or damage arising out of or based on any untrue statement
or omission or alleged untrue statement or omission or alleged omission to
state a material fact in the preliminary prospectus which is corrected in
the Prospectus if the person asserting any such loss, claim, liability,
charge or damage purchased Shares from such Underwriter but was not sent or
given a copy of the Prospectus at or prior to the written confirmation of
the sale of such Shares to such person; and (iii) the liability of each
Principal Selling Stockholder under the foregoing indemnity agreement in
this Section 7 shall not exceed the lesser of (A) that percentage of the
total amount of such losses, claims, liabilities, expenses and damages
indemnified under this Section 7 which equal the percentage obtained by
dividing the total number of Shares sold by such Principal Selling
Stockholder hereunder by the total number of Shares sold hereunder, or (B)
the total public offering price of the Option Shares sold by such Principal
Selling Stockholder under this Agreement, less underwriters' discounts and
commissions. The Company and the Principal Selling Stockholders acknowledge
that the statements set forth under the heading "Underwriting" in the
preliminary prospectus and the Prospectus constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representatives on behalf of the Underwriters expressly for inclusion in
the Registration Statement, the preliminary prospectus or the Prospectus.
This indemnity agreement will be in addition to any liability that the
Company or the Principal Selling Stockholders might otherwise have.
Each of the Selling Stockholders other than the Principal Selling
Stockholders, severally and not jointly, will indemnify and hold harmless
each Underwriter, the directors, officers, employees and agents of each
Underwriter and each person, if any, who controls each Underwriter within
the meaning of Section 15 of the Act
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or Section 20 of the Exchange Act, from and against any and all losses,
claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted), to which they, or any of them, may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or
in any documents filed under the Exchange Act and deemed to be incorporated
into the Prospectus, or the omission or alleged omission to state in such
document a material fact required to be stated in it or necessary to make
the statements in it not misleading in light of the circumstances in which
they were made, but only insofar as losses, claims, liabilities, expenses
or damages arise out of or are based on any such untrue statement or
omission or alleged untrue statement or omission that specifically and
exclusively relates to such Selling Stockholder; provided that (i) the
Company and such Selling Stockholders will not be liable to any
Underwriter, the directors, officers, employees or agents of such
Underwriter or any person controlling such Underwriter with respect to any
loss, claim, liability, expense, charge or damage arising out of or based
on any untrue statement or omission or alleged untrue statement or omission
or alleged omission to state a material fact in the preliminary prospectus
which is corrected in the Prospectus if the person asserting any such loss,
claim, liability, charge or damage purchased Shares from such Underwriter
but was not sent or given a copy of the Prospectus at or prior to the
written confirmation of the sale of such Shares to such person; and (ii)
the liability of each such Selling Stockholder under the foregoing
indemnity agreement in this paragraph shall not exceed the lesser of (A)
that percentage of the total amount of such losses, claims, liabilities,
expenses and damages indemnified under this Section 7 which equal the
percentage obtained by dividing the total number of Shares sold by such
Selling Stockholder hereunder by the total number of Shares sold hereunder,
or (B) the total public offering price of the Option Shares sold by such
Selling Stockholder under this Agreement, less underwriters' discounts and
commissions. This indemnity agreement will be in addition to any liability
that the Company or such Selling Stockholders might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, the
Selling Stockholders, each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
each director of the Company and each officer of the Company who signs the
Registration Statement to the same extent as the foregoing indemnity from
the Company to each Underwriter, but only insofar as losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in
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conformity with information relating to any Underwriter furnished in
writing to the Company by the Representatives on behalf of such Underwriter
expressly for use in the Registration Statement, the preliminary prospectus
or the Prospectus. The Company and the Selling Stockholders acknowledge
that the statements set forth under the heading "Underwriting" in the
preliminary prospectus and the Prospectus constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representatives on behalf of the Underwriters expressly for inclusion in
the Registration Statement, the preliminary prospectus or the Prospectus.
This indemnity will be in addition to any liability that each Underwriter
might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of commencement
of any action against such party in respect of which a claim is to be made
against an indemnifying party or parties under this Section 7, notify each
such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying
party will not relieve it from any liability that it may have to any
indemnified party under the foregoing provisions of this Section 7 unless,
and only to the extent that, such omission results in the loss of
substantive rights or defenses by the indemnifying party. If any such
action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be
entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of
the commencement of the action from the indemnified party, jointly with any
other indemnifying party similarly notified, to assume the defense of the
action, with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable
to the indemnified party for any legal or other expenses except as provided
below and except for the reasonable costs of investigation subsequently
incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at
the expense of such indemnified party unless (i) the employment of counsel
by the indemnified party has been authorized in writing by the indemnifying
party, (ii) the indemnified party has reasonably concluded (based on advice
of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those
available to the indemnifying party, (iii) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (iv) the indemnifying party
has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the
-23-
<PAGE>
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other
charges will be reimbursed by the indemnifying party promptly as they are
incurred. Any indemnifying party will not be liable for any settlement of
any action or claim effected without its written consent (which consent
will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but
for any reason is held to be unavailable from the Company, the Selling
Stockholders or the Underwriters, the Company, the Selling Stockholders and
the Underwriters will contribute to the total losses, claims, liabilities,
expenses and damages (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company or the Selling
Stockholders from persons other than the Underwriters, such as persons who
control the Company or the Selling Stockholders within the meaning of the
Act, officers of the Company who signed the Registration Statement and
directors of the Company, who also may be liable for contribution) to which
the Company or the Selling Stockholders and any one or more of the
Underwriters may be subject in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other. The
relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholders
bear to the total underwriting discounts and commissions received by the
Underwriters. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the
relative fault of the Company and the Selling Stockholders, on the one
hand, and the Underwriters, on the other, with respect to the statements or
omissions which resulted in such loss, claim, liability, expenses or
damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Representatives on behalf of the Underwriters, the intent of the parties
and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just
-24-
<PAGE>
and equitable if contributions pursuant to this Section 7(d) were to be
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, liability, expense or damage, or action in respect thereof, referred
to above in this Section 7(d) shall be deemed to include, for purpose of
this Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts received by it and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 7(d) are several in proportion to
their respective underwriting obligations and not joint. For purposes of
this Section 7(d), any person who controls a party to this Agreement within
the meaning of the Act will have the same rights to contribution as that
party, and each officer of the Company who signed the Registration
Statement will have the same rights to contribution as the Company, subject
in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against any
such party in respect of which a claim for contribution may be made under
this Section 7(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 7(d). No party will be
liable for contribution with respect to any action or claim settled without
its written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Company and the
Selling Stockholders contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any investigation made by or on
behalf of the Underwriters, (ii) acceptance of any of the Shares and
payment therefor or (iii) any termination of this Agreement. No Selling
Stockholder shall have any liability under this Section 7 if the Option is
not exercised in whole or in part by the Underwriters, or if the Option
Shares as to which the Option is exercised are not paid for by the
Underwriters as provided herein.
8. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Shares, on or prior to the Option Closing Date), by
notice to the Company from the Representatives, without liability on the part of
any Underwriter to the Company or any Selling Stockholder if, prior to delivery
and payment for the Shares, or the Option Shares, as the case may be, in the
sole judgment of the Representatives, (i) trading in any of the equity
securities of the Company shall
-25-
<PAGE>
have been suspended by the Commission, by an exchange that lists the Shares or
by Nasdaq, (ii) trading in securities generally on the New York Stock Exchange
shall have been suspended or limited or minimum or maximum prices shall have
been generally established on such exchange, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by such exchange or by order of the
Commission or any court or other governmental authority, (iii) a general banking
moratorium shall have been declared by either Federal or New York State
authorities or (iv) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or any outbreak or material escalation of hostilities or
other calamity or crisis shall have occurred, the effect of which is such as to
make it, in the sole judgment of the Representatives, impracticable to market
the Shares.
9. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Shares which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares, the other
Underwriters shall be obligated, severally, to purchase the Firm Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase, in the proportions which the number of Firm Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Shares which all such non-defaulting Underwriters have so agreed
to purchase, or in such other proportions as the Representatives may specify;
provided that in no event shall the maximum number of Firm Shares which any
Underwriter has become obligated to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by more than one-ninth of such number of Firm Shares
without the prior written consent of such Underwriter. If any Underwriter or
Underwriters shall fail or refuse to purchase any Firm Shares and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase exceeds one-tenth of the aggregate number of
the Firm Shares and arrangements satisfactory to the Representatives and the
Company for the purchase of such Firm Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or any Selling Stockholder or the Company for the
purchase or sale of any Shares under this Agreement. In any such case either
the Representatives or the Company and the Attorneys shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or in any other documents or arrangements may be effected. Any
action taken pursuant to this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
10. Miscellaneous. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company or any Selling Stockholder, at the office of
the Company, 590 Lincoln Street, Waltham,
-26-
<PAGE>
MA 02154, Attention: Chief Executive Officer, with a copy to Lawrence M. Levy,
Esq., Brown, Rudnick, Freed & Gesmer, P.C., One Financial Center, Boston, MA
02111; or (b) if to the Underwriters, to the Representatives at the offices of
Needham & Company, Inc., 400 Park Avenue, New York, New York 10022, Attention:
Corporate Finance Department, with a copy to Edwin L. Miller, Jr., Esq., Testa,
Hurwitz & Thibeault, 125 High Street, Boston, MA 02110. Any such notice shall be
effective only upon receipt. Any notice under Sections 8 or 9 hereof may be made
by telex or telephone, but if so made shall be confirmed in writing.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company and the Selling Stockholders and of the controlling
persons, directors and officers referred to in Section 7, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" as used
in this Agreement shall not include a purchaser, as such purchaser, of Shares
from any of the several Underwriters.
With respect to any obligation of the Company and the Selling Stockholders
hereunder to make any payment, to indemnify for any liability or to reimburse
for any expense, notwithstanding the fact that such obligation is a joint and
several obligation of the Company and the Selling Stockholders, the Underwriters
(or any other person to whom such payment, indemnification or reimbursement is
owed) may pursue the Company with respect thereto prior to pursuing any Selling
Stockholder.
Any action required or permitted to be made by the Representatives under
this Agreement may be taken by them jointly or by Needham & Company, Inc.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company, the Selling Stockholders and the Underwriters each hereby
waive any right they may have to a trial by jury in respect of any claim based
upon or arising out of this Agreement or the transactions contemplated hereby.
-27-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
HOLOGIC, INC.
By: ______________________________
Title: Chief Executive Officer
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE II ATTACHED HERETO
By: ______________________________
Attorney-in-Fact
Confirmed as of the date first above mentioned:
NEEDHAM & COMPANY, INC.
TUCKER ANTHONY INCORPORATED
ADAMS, HARKNESS & HILL, INC.
Acting on behalf of themselves and as the
Representatives of the other several Under-
writers named in Schedule I hereof.
By: NEEDHAM & COMPANY, INC.
By: _____________________________
Title: Managing Director
By: TUCKER ANTHONY INCORPORATED
By: _____________________________
Title:
ADAMS, HARKNESS & HILL, INC.
By: _____________________________
Title:
-28-
<PAGE>
SCHEDULE I
UNDERWRITERS
NUMBER OF
FIRM SHARES TO
NAME OF UNDERWRITER BE PURCHASED
------------------- --------------
Needham & Company, Inc.........................................
Tucker Anthony Incorporated....................................
Adams, Harkness & Hill, Inc....................................
Total............... 1,200,000
=========
<PAGE>
SCHEDULE II
SELLING STOCKHOLDERS
TOTAL NUMBER OF OPTION
NAME OF SELLING STOCKHOLDER SHARES TO BE SOLD
- --------------------------- -----------------
S. David Ellenbogen............................... 60,000
Jay A. Stein...................................... 60,000
Steve L. Nakashige................................ 5,000
Irwin Jacobs...................................... 3,000
William A. Peck................................... 1,000
Gerald Segel...................................... 5,000
-------
Total............... 180,000
=======
<PAGE>
EXHIBIT A
---------
SUBSIDIARIES
------------
<PAGE>
ANNEX A
-------
MATTERS TO BE COVERED IN OPINION OF COMPANY COUNSEL
---------------------------------------------------
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business
and is in good standing as a foreign corporation in each
jurisdiction in which its ownership or lease of property or the
conduct of its business requires such qualification (except where
non-qualification would not have a material and adverse affect on
the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company
or any of its subsidiaries (a "Material Adverse Effect")) and has
all corporate power and authority necessary to own or hold its
properties and conduct the businesses in which it is engaged;
each of the subsidiaries of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; is
duly qualified to do business and is in good as a foreign
corporation in each jurisdiction in which its ownership or lease
of property or the conduct of its business requires such
qualification (except where non-qualification would not have a
Material Adverse Effect) and has all corporate power and
authority necessary to own or hold its properties and conduct the
business in which it is engaged;
(ii) The Company has capital stock authorized and
outstanding as set forth in the Prospectus under the caption
"Description of Capital Stock," and all of the issued and
outstanding shares of capital stock of the Company (including the
Shares being delivered on the date of such opinion) have been
duly and validly authorized and issued, are fully paid and non-
assessable and conform to the description thereof contained in
the Prospectus; the certificates for the Shares are in due and
proper form; and all of the issued and outstanding shares of
capital stock of each subsidiary of the Company have been duly
and validly authorized and issued and are fully paid, non-
assessable and (except for directors' qualifying shares and
except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iii) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting
or transfer of, any shares of
<PAGE>
Common Stock pursuant to the Company's charter or by-laws or any
agreement or other instrument known to such counsel;
(iv) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property or assets of
the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries,
would have a Material Adverse Effect; and, to the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(v) The Registration Statement was declared effective
under the Securities Act as of the date and time specified in
such opinion, the Prospectus was filed with the Commission
pursuant to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date specified
therein and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the knowledge of
such counsel, no proceeding for that purpose is pending or
threatened by the Commission;
(vi) The Registration Statement and the Prospectus and any
further amendments or supplements thereto (other than the
financial statements and related schedules therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and
the Rules and Regulations; and the documents incorporated by
reference in the Prospectus (other than the financial statements
and related schedules therein, as to which such counsel need
express no opinion), when they were filed with the Commission,
complied as to form in all material respects with the
requirements of the Exchange Act and the Exchange Act Rules and
Regulations;
(vii) The statements under the caption "Description of
Capital Stock" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters
of law, are accurate summaries in all material respects and
fairly and correctly present the information called for with
respect to such documents and matters;
(viii) To the best of such counsel's knowledge, there are
no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the
Registration Statement by the
<PAGE>
Securities Act or by the Rules and Regulations which have not
been described or filed as exhibits to the Registration Statement
or incorporated therein by reference as permitted by the Rules
and Regulations and such contracts or documents as are summarized
in the Registration Statement or the Prospectus are fairly
summarized in all material respects;
(ix) This Agreement has been duly authorized, executed
and delivered by the Company;
(x) The issue and sale of the Shares being delivered on
the date of such opinion by the Company and the compliance by the
Company with all of the provisions of this Agreement and the
consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries
is subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries
or any of their properties or assets; and, except for the
registration of the Shares under the Securities Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act, the
rules and regulations of the NASD, and applicable state
securities laws in connection with the purchase and distribution
of the Shares by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated
hereby; and
(xi) To the best of such counsel's knowledge, there are no
contracts, agreements or understandings between the Company and
any person granting such person the right (other than rights
which have been waived or satisfied) to require the Company to
file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities
in the securities registered pursuant to the
<PAGE>
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company
under the Securities Act.
[The following clauses are applicable to the opinion to
be furnished on the Option Closing Date only.]
(xii) Each Selling Stockholder has full right, power and
authority to enter into this Agreement, the Custody Agreement and
the Power of Attorney; the execution, delivery and performance of
this Agreement, the Custody Agreement and the Power of Attorney
by each Selling Stockholder and the consummation by each Selling
Stockholder of the transactions contemplated hereby and thereby
will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which
any Selling Stockholder is a party or by which any Selling
Stockholder is bound or to which any of the property or assets of
any Selling Stockholder is subject, nor will such actions result
in any violation of the provisions of any statute or any order,
rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over any Selling
Stockholder or the property or assets of any Selling Stockholder;
and, except for the registration of the Shares under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Exchange Act, the rules and regulations of the NASD, and
applicable state securities laws in connection with the purchase
and distribution of the Shares by the Underwriters, no consent,
approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required
for the execution, delivery and performance of this Agreement,
the Custody Agreement or the Power of Attorney by each Selling
Stockholder and the consummation by each Selling Stockholder of
the transactions contemplated hereby and thereby;
(xiii) This Agreement has been duly authorized, executed
and delivered by or on behalf of each Selling Stockholder;
(xiv) The Custody Agreement and the Power of Attorney
have been duly authorized, executed and delivered by each Selling
Stockholder and constitute the valid and binding agreement of
each Selling Stockholder, enforceable in accordance with their
respective terms;
<PAGE>
(xv) Immediately prior to the Option Closing Date, each
Selling Stockholder had good and valid title to the shares of
Stock to be sold by each Selling Stockholder under this
Agreement, free and clear of all liens, encumbrances, equities or
claims, and full right, power and authority to sell, assign,
transfer and deliver such shares to be sold by each Selling
Stockholder hereunder; and
(xvi) Good and valid title to the shares of Stock to be
sold by each Selling Stockholder under this Agreement, free and
clear of all liens, encumbrances, equities or claims, has been
transferred to each of the several Underwriters.
Such counsel shall also have furnished to the Representatives a
written statement, addressed to the Underwriters and dated as of the
applicable Closing Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted as
counsel to the Company in connection with the preparation of the
Registration Statement, and (y) based on the foregoing, no facts have
come to the attention of such counsel which lead it to believe that
(I) the Registration Statement, as of the Effective Date, contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, or that the Prospectus contains any
untrue statement of a material fact or omits 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 or (II) any document incorporated by
reference in the Prospectus, when it was filed with the Commission,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The foregoing opinion and statement may be qualified by a statement to
the effect that such counsel does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Registration Statement or the Prospectus except for the statements
made in the Prospectus under the caption "Description of Capital
Stock" insofar as such statements relate to the Shares and concern
legal matters.
<PAGE>
ANNEX B
-------
MATTERS TO BE COVERED IN OPINION OF PATENT COUNSEL TO THE COMPANY
-----------------------------------------------------------------
(i) Schedule I to such opinion identifies, as of [applicable
Closing Date], all U.S. patents and U.S. applications known to such
counsel and filed by the Company, in which the Company currently has an
interest. As of [recent specified date], the Company was listed in the
records of the U.S. Patent and Trademark Office (the "PTO") as a holder
of record of each of the patents and patent applications listed in
Schedule I. The patent rights to the applications listed in Schedule I,
to the best of such counsel's knowledge, have been assigned to the
Company. Based on a search of the documents of record in the PTO as of
[recent specified date], a review of the Company records through that
date, and a review of the certificate of an officer of the Company, such
counsel has no knowledge of any facts which would preclude the Company
from having clear title to the patents and patent applications listed in
Schedule I.
(ii) To the best of such counsel's knowledge, none of the claims
of the patents set forth in Schedule I is invalid or unenforceable.
Each of the applications set forth in Schedule I is pending in the PTO,
and such counsel is unaware of any defects in the prosecution of any
such application that would irrevocably foreclose pursuit of the patent
rights thereunder.
(iii) To the best of such counsel's knowledge, there is no
pending or threatened action, suit, proceeding, or claim by others that
the Company is infringing any patent.
(iv) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending relating to the patents or
applications set forth in Schedule I, other than review of pending
applications for patent, including appeal proceedings, and to the best
of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or others.
(v) To the best of such counsel's knowledge, there is no pending
action, suit, proceeding or claim by others challenging the validity of
any claim of the patents set forth in Schedule I. To the best of such
counsel's knowledge, there is no interference proceeding or public use
proceeding with respect to any application set forth in Schedule I.
<PAGE>
HOLOGIC, INC.
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 (this "Amendment No. 1"), dated as of December __,
1995, to the Rights Agreement (the "Rights Agreement"), dated as of December 22,
1992, between Hologic, Inc., a Delaware Corporation (the "Company"), and
American Stock Transfer & Trust Company, a New York trust company.
RECITALS
1. The Board of Directors of the Company has authorized an underwritten
public offering of the Company's Common Stock, $.01 par value;
2. The Board of Directors has determined that it is in the best interest
of the Company to amend the Rights Agreement so that such Agreement does not
apply to the purchase by an underwriter of the Company's Common Stock in an
underwritten public offering.
3. Capitalized terms used but not defined in this Amendment No. 1 shall
have the meanings given them in the Rights Agreement.
NOW, THEREFORE, in consideration of the promises and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AMENDMENT OF SUBPARAGRAPH (A) ARTICLE I, SECTION 1.1. Subparagraph
(a) of ARTICLE I, Section 1.1 is hereby amended and restated so that such
subparagraph reads in its entirety as follows:
"(a) "Acquiring Person" means any Person who is a Beneficial Owner of 15%
or more of the outstanding shares of Common Stock; provided, however, that the
term "Acquiring Person" shall not include (i) any Person who shall become the
Beneficial Owner of 15% or more of the outstanding shares of Common Stock solely
as a result of an acquisition by the Company of shares of Common Stock, until
such time hereafter or thereafter as such Person shall become the Beneficial
Owner (other than by means of a stock dividend or stock split) of any additional
shares of Common Stock, (ii) any Person who inadvertently acquired Beneficial
Ownership of 15% or more of the outstanding shares of Common Stock or otherwise
acquired Beneficial Ownership of shares of Common Stock without any plan or
intention to seek control of the Company and without knowledge that such
acquisition would make such Person an Acquiring Person, if, in either case,
such Person promptly divests (without exercising or retaining any power,
including voting, with respect to such shares) a sufficient number of shares of
Common Stock (or securities convertible into Common Stock) so that such Person
ceases to be the Beneficial Owner of 15% or more of the outstanding shares of
Common Stock, after notice by the Company that such Person will be deemed by the
Company to be an
1
<PAGE>
Acquiring Person unless such Person makes such divestitures, or (iii) an
underwriter or underwriters which purchase shares of Common Stock in an
underwritten public offering with a view to the public distribution of such
shares of Common Stock."
2. REAFFIRMATION OF RIGHTS AGREEMENT. Except as specifically amended by
this Amendment No. 1, the Rights Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed as of the date first above written.
HOLOGIC, INC.
By: /s/ S. David Ellenbogen
--------------------------------------------
S. David Ellenbogen, Chief Executive Officer
AMERICAN STOCK TRANSFER AND
TRUST COMPANY
By: /s/ Carolyn B. O'Neill
--------------------------------------------
Name: Carolyn B. O'Neill
Title: Vice President
2
<PAGE>
[LOGO APPEARS HERE]
BROWN
RUDNICK
FREED &
GESMER
December 14, 1995
Hologic, Inc.
590 Lincoln Street
Waltham, MA 02154
RE: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as legal counsel to Hologic, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), of a Registration Statement on Form S-3 (the "Registration
Statement") relating to 1,380,000 Rights (as defined below) and 1,380,000 shares
of the Company's Common Stock, $.01 par value (the "Common Stock"), of which up
to 1,246,000 shares may be sold by the Company (the "Company Shares") and of
which up to 134,000 shares may be sold by certain selling stockholders. Of such
134,000 shares, up to 14,000 shares (the "Option Shares") are to be acquired
upon the exercise of outstanding options, pursuant to certain Option Agreements
("Option Agreements") issued under the Company's 1986 Amended and Restated
Combination Stock Option Plan (the "Plan"), and the remaining 120,000 shares
(the "Selling Stockholder Shares") are currently held by certain selling
stockholders.
Pursuant to the Registration Statement and an underwriting agreement by and
between the Company, certain selling stockholders, and Needham & Company, Inc.,
Tucker Anthony Incorporated and Adams, Harkness & Hill, Inc. (the
"Underwriters"), in substantially the form filed as Exhibit 1.01 to the
Registration Statement (the "Underwriting Agreement"), the Company proposes to
sell to the Underwriters up to 1,200,000 shares of Common Stock, and the Company
and certain selling stockholders propose to sell up to an additional 46,000 and
134,000 shares of Common Stock, respectively, if the Underwriters' over-
allotment option is exercised in full. The Rights are issuable pursuant to that
certain Rights Agreement, dated as of December 22, 1992, as amended by Amendment
No. 1 dated December 14, 1995 (the "Rights Agreement"), providing, in effect,
for the delivery of a right (a "Right"), along with each share of Common Stock
issued by the Company pursuant to the Underwriting Agreement. This opinion is
being rendered in connection with the filing of the Registration Statement.
In connection with this Opinion Letter, we have examined the documents listed
on Schedule A attached hereto (collectively, the "Documents").
A Partnership of
Professional Corporations
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
617-330-9000
FAX: 617-439-3278
Hartford / Providence
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[LOGO APPEARS HERE]
Hologic, Inc.
December 14, 1995
Page 2
With your concurrence, the opinions hereafter expressed, whether or not
qualified by language such as "to our knowledge," are based solely upon (1) our
review of the Documents and (2) such review of published sources of law as we
have deemed necessary.
This firm, in rendering legal opinions, customarily makes certain
assumptions which are described in Schedule B hereto. In the course of our
representation of the Company in connection with the Registration Statement,
nothing has come to our attention which causes us to believe reliance upon any
of those assumptions is inappropriate and, with your concurrence, the opinions
hereafter expressed are based upon those assumptions. For purposes of those
assumptions, the Enumerated Party referred to in Schedule B is the Company.
Our opinions hereafter expressed are limited to the laws of the
Commonwealth of Massachusetts, the Federal law of the United States and the
General Corporation Law of the State of Delaware.
We express no legal opinion upon any matter other than as explicitly
addressed in numbered paragraphs 1 through 4 below, and our express opinions
therein contained shall not be interpreted to be implied opinions upon any other
matter.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company Shares have been duly authorized and, when issued and paid
for in accordance with the terms of the Underwriting Agreement, such shares
will be validly issued, fully paid and nonassessable.
2. The Option Shares have been duly authorized and, when issued and paid
for in accordance with the terms of the Option Agreements, and sold as
comtemplated in the Registration Statement, such shares will be validly issued,
fully paid and nonassessable.
3. The Selling Stockholder Shares have been duly authorized and, when sold
as contemplated in the Registration Statement, such shares will be validly
issued, fully paid and nonassessable.
4. The Rights have been duly authorized and, when issued in accordance
with the terms of the Rights Agreement, will be validly issued, fully paid and
nonassessable.
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[LOGO APPEARS HERE]
Hologic, Inc.
December 14, 1995
Page 3
We hereby consent to the filing of this opinion as Exhibit 5.01 to the
Registration Statement and to the reference to this firm wherever it appears in
the Registration Statement.
Very truly yours,
BROWN, RUDNICK, FREED & GESMER
By: Brown, Rudnick, Freed
& Gesmer, P.C., a partner
By: /s/ Philip J. Flink
-------------------------------------------
Philip J. Flink, a member duly authorized
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Hologic, Inc.
December 14, 1995
Page 4
SCHEDULE A
LIST OF DOCUMENTS
-----------------
In connection with the Opinion Letter to which this Schedule A is attached,
we have reviewed the Documents set forth below. However, except as otherwise
expressly indicated, we have not reviewed any other documents, instruments or
agreements referred to in or listed upon any of the following Documents.
(i) the corporate minute books of the Company relating to actions of
directors and stockholders of the Company;
(ii) a specimen certificate of the Company's Common Stock;
(iii) the Plan;
(iv) the Option Agreements;
(v) the form of Notice of Exercise to be delivered pursuant to the
Option Agreements;
(vi) the Rights Agreement;
(vii) the Registration Statement;
(viii) the proposed form of Underwriting Agreement;
(ix) a letter dated December 13, 1995 from American Stock Transfer & Trust
Company, the Company's registrar and transfer agent, as to the issued and
outstanding shares of the Company; and
(x) a Certificate of the Treasurer of the Company as to which we have
relied exclusively with respect to our opinion regarding the full payment for
the Selling Stockholder Shares.
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[LOGO APPEARS HERE]
Hologic, Inc.
December 14, 1995
Page 5
SCHEDULE B
BROWN, RUDNICK, FREED & GESMER
STANDARD ASSUMPTIONS
--------------------
In rendering legal opinions in third party transactions, Brown, Rudnick,
Freed & Gesmer makes certain customary assumptions described below:
1. Each natural person executing any of the Documents has sufficient legal
capacity to enter into such Documents.
2. Each person other than the Enumerated Party has all requisite power and
authority and has taken all necessary corporate or other action to
enter into the Documents to which it is a party or by which it is
bound, to the extent necessary to make the Documents enforceable
against it.
3. Each person other than the Enumerated Party has complied with all legal
requirements pertaining to its status as such status relates to its
rights to enforce the Documents against the Enumerated Party.
4. Each Document is accurate, complete and authentic, each original is
authentic, each copy conforms to an authentic original and all
signatures are genuine.
5. All official public records are accurate, complete and properly indexed
and filed.
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EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Boston, Massachusetts
December 13, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HOLOGIC
INC.'S FY95 FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> SEP-25-1994
<PERIOD-END> SEP-30-1995
<CASH> 7,447,813
<SECURITIES> 2,492,671
<RECEIVABLES> 11,643,883
<ALLOWANCES> 850,000
<INVENTORY> 6,917,000
<CURRENT-ASSETS> 30,560,074
<PP&E> 3,759,322
<DEPRECIATION> 2,298,168
<TOTAL-ASSETS> 33,862,013
<CURRENT-LIABILITIES> 11,190,315
<BONDS> 0
<COMMON> 41,221
0
0
<OTHER-SE> 22,630,477
<TOTAL-LIABILITY-AND-EQUITY> 33,862,013
<SALES> 41,129,782
<TOTAL-REVENUES> 43,399,850
<CGS> 22,090,963
<TOTAL-COSTS> 41,221,683
<OTHER-EXPENSES> 268,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,519,519
<INCOME-TAX> 650,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,869,519
<EPS-PRIMARY> .43
<EPS-DILUTED> .41
</TABLE>
