<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
HOLOGIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3844 04-2902449
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) 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
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, ESQ. JEFFREY R. PATT, ESQ.
BROWN, RUDNICK, FREED & GESMER KATTEN MUCHIN & ZAVIS
ONE FINANCIAL CENTER 525 WEST MONROE STREET
BOSTON, MASSACHUSETTS 02111 CHICAGO, ILLINOIS 60661-3698
(617) 856-8200 (312) 902-5200
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after all conditions to the merger of Fenway Acquisition Corp., a
wholly-owned subsidiary of Hologic, Inc., with and into FluoroScan Imaging
Systems, Inc. pursuant to an Agreement and Plan of Merger dated July 18, 1996
described in the enclosed Proxy Statement/Prospectus have been satisfied or
waived.
----------------
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE MAXIMUM OFFERING AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(2) PRICE(2) FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share....... 4,901 shares $9.75 $153,802.02 $100(3)
- --------------------------------------------------------------------------------------------
Rights to Purchase
Common
Stock (4)............. 4,901 rights -- -- --
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Based upon an estimate of the maximum number of shares of the Registrant's
Common Stock, $ .01 par value per share, issuable in the merger described
herein to holders of shares of capital stock of FluoroScan Imaging
Systems, Inc.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, on the bases of
the average of the bid and asked price of the securities to be received by
the Registrant in the transaction.
(3) The entire amount of this registration fee was paid in connection with the
Registration Statement on Form S-4, Registration No. 333-08977.
(4) 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 Registrant. 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.
--------
THIS REGISTRATION STATEMENT IS FILED PURSUANT TO RULE 429 UNDER THE
SECURITIES ACT OF 1933 AND RELATES TO THE REGISTRATION OF 4,901 ADDITIONAL
SHARES IN CONNECTION WITH THE REGISTRATION STATEMENT ON FORM S-4, REGISTRATION
NO. 333-08977.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
HOLOGIC, INC.
CROSS-REFERENCE SHEET SHOWING THE LOCATION IN THE PROXY STATEMENT/PROSPECTUS OF
INFORMATION REQUIRED BY THE REGISTRATION FORM
<TABLE>
<CAPTION>
ITEM
NO. CAPTION LOCATION IN PROSPECTUS
- ---- ------- ----------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................. Forepart of Registration Statement; Outside
Front Cover Page of Proxy
Statement/Prospectus.
2. Inside Front and Outside Back Cover
Pages of Prospectus.................... Inside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Table of Contents.
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.......... Summary; Risk Factors; The Merger and
Related Transactions; Selected Historical
Consolidated Financial Data; Hologic
Unaudited Selected Pro Forma Combined
Condensed Financial Data; Comparative
Market Price Data; The Special Meeting;
Index to Financial Statements.
4. Terms of the Transaction................ Summary; The Merger and Related
Transactions; Description of Hologic
Capital Stock; Comparative Rights of the
Hologic and FluoroScan Stockholders.
5. Pro Forma Financial Information......... Summary; Hologic Unaudited Selected Pro
Forma Combined Condensed Financial Data;
Index to Financial Statements.
6. Material Contacts With the Company Being
Acquired............................... Summary; the Merger and Related
7. Additional Information Required for Transactions
Reoffering by Persons and Parties
Deemed to be Underwriters.............. *
8. Interests of Named Experts and Counsel.. *
9. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities............................ *
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants............................ *
11. Incorporation of Certain Information by
Reference.............................. *
12. Information with Respect to S-2 or S-3
Registrants............................ *
13. Incorporation of Certain Information by
Reference.............................. *
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants...... Summary; Information Regarding Hologic;
Description of Hologic Capital Stock;
Comparative Market Price Data; Index to
Financial Statements; Selected Historical
Consolidated Financial Data; Hologic
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM
NO. CAPTION LOCATION IN PROSPECTUS
- ---- ------- ----------------------
<S> <C> <C>
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information With Respect to S-3
Companies.............................. *
16. Information With Respect to S-2 or S-3
Companies.............................. *
17. Information With Respect to Companies
Other Than S-2 or S-3 Companies........ Summary; Information Regarding FluoroScan;
Comparative Market Price Data; Index to
Financial Statements; Selected Historical
Financial Data; FluoroScan Management's
Discussion and Analysis of Financial
Condition and Results of Operations.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited..... Outside Front Cover Page of Proxy
Statement/Prospectus; Summary; The Merger
and Related Transactions; The Special
Meeting; Principal Stockholders of
Hologic; Principal Stockholders of
FluoroScan; Hologic Management; Certain
Transactions; Description of Hologic
Capital Stock.
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited
in an Exchange Offer................... *
</TABLE>
- --------
* Not Applicable
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
650-B ANTHONY TRAIL
NORTHBROOK, ILLINOIS 60062
August 7, 1996
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
FluoroScan Imaging Systems, Inc. ("FluoroScan"), which will be held at the
offices of Katten Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois
60661, on Thursday, August 29, 1996, at 8:00 a.m., local time.
At this important meeting you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of
July 18, 1996 (the "Merger Agreement"), by and among FluoroScan, Hologic, Inc.
("Hologic"), and Fenway Acquisition Corp., a newly-formed and wholly-owned
subsidiary of Hologic ("Merger Sub"), and the merger (the "Merger") of Merger
Sub with and into FluoroScan. If the Merger Agreement and the Merger are
approved, and the Merger becomes effective, FluoroScan will become a wholly-
owned subsidiary of Hologic and each outstanding share of FluoroScan Common
Stock issued and outstanding immediately prior to the consummation of the
Merger (the "Effective Time") will be converted into the right to receive
.31069 shares of Hologic Common Stock, subject to adjustment as described
below (the "Conversion Ratio"). If the average closing price per share of the
Hologic Common Stock as quoted on the Nasdaq National Market for the ten
trading days ending two business days prior to the Effective Time (the
"Average Market Value") is greater than $50.29, the Conversion Ratio will be
adjusted to equal $15.63 divided by the Average Market Value. If the Average
Market Value is less than $30.17, at Hologic's election the Conversion Ratio
will be adjusted to equal $9.37 divided by the Average Market Value. If the
Average Market Value is less than $30.17, and Hologic does not elect to adjust
the Conversion Ratio, the Board of Directors of FluoroScan may elect to
terminate the Merger Agreement and the Merger. Under Delaware Law, FluoroScan
stockholders will not be entitled to any appraisal rights with respect to the
Merger.
Rodman & Renshaw, Inc. ("Rodman") was retained by FluoroScan to act as its
independent financial advisor in connection with the Merger. As discussed in
the accompanying Proxy Statement/Prospectus, Rodman has delivered to the
FluoroScan Board of Directors its written opinion, dated July 18, 1996, that,
as of the date of such opinion and subject to certain assumptions, factors and
limitations set forth in such opinion, the Conversion Ratio to be offered to
FluoroScan's stockholders pursuant to the Merger is fair, from a financial
point of view, to such stockholders. A copy of the opinion of Rodman is
attached as Appendix B to the accompanying Proxy Statement/Prospectus, and you
are urged to read it in its entirety.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR AND IN THE
BEST INTERESTS OF FLUOROSCAN AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
YOU SHOULD NOT RETURN CERTIFICATES FOR FLUOROSCAN COMMON STOCK WITH THE
ENCLOSED PROXY CARD. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES UNTIL YOU
HAVE RECEIVED A TRANSMITTAL LETTER FROM THE EXCHANGE AGENT.
It is important that your shares be represented at the Special Meeting,
regardless of the number you hold. Therefore, please sign, date and return the
enclosed proxy card as soon as possible, whether or not you plan to attend the
Special Meeting. This will not prevent you from voting your shares in person
if you subsequently choose to attend the Special Meeting.
Sincerely,
Larry S. Grossman
Chairman and Chief Executive Officer
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
650-B ANTHONY TRAIL
NORTHBROOK, ILLINOIS 60062
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 29, 1996
----------------
A Special Meeting of Stockholders of FluoroScan Imaging Systems, Inc., a
Delaware corporation ("FluoroScan"), will be held at the offices of Katten
Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois 60661, on Thursday,
August 29, 1996, at 8:00 a.m., local time, for the following purposes which
are described more fully in the accompanying Proxy Statement/Prospectus:
(1) To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of July 18, 1996 (the "Merger
Agreement"), by and among FluoroScan, Hologic, Inc., a Delaware corporation
("Hologic"), and Fenway Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Hologic ("Merger Sub"), and the merger (the
"Merger") of Merger Sub with and into FluoroScan. At the effective time of
the Merger (the "Effective Time"), FluoroScan will become a wholly-owned
subsidiary of Hologic and each share of FluoroScan Common Stock, par value
$0.0001 per share (the "FluoroScan Common Stock"), issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive .31069 shares of Hologic Common Stock, $.01 par value per share
(the "Hologic Common Stock"), subject to adjustment as described below (the
"Conversion Ratio"). If the average closing price per share of the Hologic
Common Stock as quoted on the Nasdaq National Market for the ten trading
days ending two business days prior to the Effective Time (the "Average
Market Value") is greater than $50.29, the Conversion Ratio will be
adjusted to equal $15.63 divided by the Average Market Value, and (ii) if
the Average Market Value is less than $30.17, at Hologic's election the
Conversion Ratio will be adjusted to equal $9.37 divided by the Average
Market Value. If the Average Market Value is less than $30.17, and Hologic
does not elect to adjust the Conversion Ratio, the Board of Directors of
FluoroScan may elect to terminate the Merger Agreement and the Merger.
(2) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on August 5, 1996 as
the record date for the determination of the holders of FluoroScan Common
Stock entitled to notice of, and to vote at, the meeting. Accordingly, only
holders of record of FluoroScan Common Stock at the close of business on such
date will be entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof.
The Merger is more particularly described in the accompanying Proxy
Statement/Prospectus, and a copy of the Merger Agreement is attached thereto
as Appendix A. The affirmative vote of the holders of a majority of the
outstanding shares of FluoroScan Common Stock entitled to vote thereon, at a
meeting at which a quorum is present, is necessary for the approval and
adoption of the Merger Agreement and the Merger. Under Delaware Law,
FluoroScan stockholders will not be entitled to any appraisal rights with
respect to the Merger.
Your Board of Directors unanimously has determined that the Merger is fair
to and in the best interests of FluoroScan and its stockholders, unanimously
has approved the Merger Agreement (and the transactions contemplated thereby)
and unanimously recommends that the holders of FluoroScan Common Stock vote
"FOR" approval and adoption of the Merger Agreement and the Merger.
By Order of the Board of Directors,
Larry S. Grossman, Secretary
ALL FLUOROSCAN STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL
MEETING. TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU
ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE. A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT
PURPOSE. ANY STOCKHOLDER ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON
EVEN IF THAT STOCKHOLDER HAS RETURNED A PROXY CARD.
August 7, 1996
<PAGE>
PROXY STATEMENT/PROSPECTUS
---------------
[HOLOGIC LOGO] [FLUOROSCAN LOGO]HOLOGIC, INC.
PROSPECTUS
COMMON STOCK, $0.01 PAR VALUE
---------------
This Proxy Statement/Prospectus is being furnished to stockholders of
FluoroScan Imaging Systems, Inc., a Delaware corporation ("FluoroScan"), in
connection with the solicitation of proxies by the Board of Directors of
FluoroScan for use at a Special Meeting of Stockholders to be held at the
offices of Katten Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois
60661, on Thursday, August 29, 1996, at 8:00 a.m., local time, and at any and
all adjournments or postponements thereof (the "Special Meeting").
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of Fenway Acquisition Corp. ("Merger Sub"), a Delaware corporation
and wholly-owned subsidiary of Hologic, Inc., a Delaware corporation
("Hologic"), with and into FluoroScan, with FluoroScan surviving the Merger,
pursuant to an Agreement and Plan of Merger, dated as of July 18, 1996, a copy
of which is attached hereto as Appendix A (the "Merger Agreement"), among
FluoroScan, Merger Sub and Hologic. As a result of the Merger, FluoroScan will
become a wholly-owned subsidiary of Hologic.
At the effective time of the Merger (the "Effective Time"), each outstanding
share of FluoroScan Common Stock, $0.0001 par value per share ("FluoroScan
Common Stock"), issued and outstanding immediately prior to the Effective Time
will be converted into the right to receive .31069 shares of Hologic Common
Stock, $.01 par value per share (the "Hologic Common Stock"), subject to
adjustment as described below (the "Conversion Ratio"). If the average closing
price of the Hologic Common Stock as quoted on the Nasdaq National Market for
the ten trading days ending two business days prior to the Effective Time (the
"Average Market Value") is greater than $50.29, the Conversion Ratio will be
adjusted to equal $15.63 divided by the Average Market Value, and (ii) if the
Average Market Value is less than $30.17, at Hologic's election the Conversion
Ratio will be adjusted to equal $9.37 divided by the Average Market Value. If
the Average Market Value is less than $30.17, and Hologic does not elect to
adjust the Conversion Ratio, the Board of Directors of FluoroScan may elect to
terminate the Merger Agreement and the Merger. Holders of FluoroScan Common
Stock shall also have the right to receive together with each share of Hologic
Common Stock issued in connection with the Merger, an associated common stock
purchase right ("Hologic Purchase Right") pursuant to the Rights Agreement
dated as of December 22, 1992, as amended (the "Rights Agreement"), between
Hologic and American Stock Transfer & Trust Company, as Rights Agent.
References herein to the Hologic Common Stock issuable in the Merger shall be
deemed to include the associated Hologic Purchase Rights. As of the Record
Date, there were 4,622,894 shares of FluoroScan Common Stock outstanding.
Assuming no adjustment to the Conversion Ratio, and without giving effect to
the issuance of any shares of FluoroScan Common Stock after the Record Date,
upon consummation of the Merger, Hologic will issue approximately 1,436,287
shares of Hologic Common Stock.
This Proxy Statement/Prospectus also constitutes the Prospectus of Hologic
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Hologic Common Stock to be issued in connection with
the Merger. Shares of Hologic Common Stock are traded on the Nasdaq National
Market under the symbol "HOLX." On August 5, 1996, the closing sales price of
the Hologic Common Stock, as reported on the Nasdaq National Market, was
$37.25 per share.
This Proxy Statement/Prospectus, the accompanying Notice of Special Meeting
and the accompanying form of proxy are first being mailed to FluoroScan
stockholders on or about August 7, 1996.
The Board of Directors of FluoroScan has unanimously determined that the
Merger is fair to and in the best interests of FluoroScan and its
Stockholders, unanimously approved the Merger Agreement (and the transactions
contemplated thereby) and unanimously recommends that holders of FluoroScan
Common Stock vote FOR the approval and adoption of the Merger Agreement and
the Merger. See "The Merger and Related Transactions--Background of the
Merger," "--FluoroScan's Reasons for the Merger," "--Recommendation of
FluoroScan Board of Directors," and "--Interests of Certain Persons in the
Merger."
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED CAREFULLY BY FLUOROSCAN STOCKHOLDERS.
THE SECURITIES TO BE ISSUED IN THE MERGER 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 PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is August 6, 1996.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY
BE MADE. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN OR INCORPORATED BY REFERENCE HEREIN AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
AVAILABLE INFORMATION
Hologic and FluoroScan are each subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Hologic and FluoroScan may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Hologic Common Stock and the FluoroScan
Common Stock are each listed and traded on the Nasdaq National Market.
Material filed by Hologic and FluoroScan, respectively, can be inspected at
the offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C.
20006-1500.
Hologic has filed with the Commission a Registration Statement on Form S-4
(together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Hologic Common Stock
to be issued pursuant to the Merger Agreement. This Proxy Statement/Prospectus
constitutes the prospectus of Hologic that is filed as part of the
Registration Statement. This Proxy Statement/Prospectus does not contain all
the information set forth in the Registration Statement. Copies of the
Registration Statement are available from the Commission, upon payment of
prescribed rates. For further information, reference is made to the
Registration Statement and the exhibits filed therewith. Statements contained
in this Proxy Statement/Prospectus or in any document incorporated by
reference in this Proxy Statement relating to the contents of any contract or
other document referenced to herein or therein are summaries of the terms
thereof and, therefore, not necessarily complete. With respect to each
contract or other document filed as an exhibit to the Registration Statement,
reference is hereby made to that exhibit for a more complete description of
the matter involved and each such statement is qualified in all respects by
such reference.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO
HOLOGIC AND MERGER SUB HAS BEEN PROVIDED BY HOLOGIC. ALL INFORMATION CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO FLUOROSCAN HAS BEEN
PROVIDED BY FLUOROSCAN.
----------------
The Hologic logo is a service mark of Hologic. QDR and QDR-1000 are
registered trademarks of Hologic, 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 Hologic. The trademarks Scanora and Walker
Sonix are licensed by Hologic. FluoroScan, FluoroScan I, FluoroScan II,
FluoroScan III and FluoroScan Imaging Systems are trademarks of FluoroScan.
This Prospectus also contains trademarks of other companies.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT/PROSPECTUS............................................... 1
AVAILABLE INFORMATION.................................................... 2
SUMMARY.................................................................. 5
RISK FACTORS............................................................. 16
THE SPECIAL MEETING...................................................... 22
Date, Place and Time of Meeting........................................ 22
Record Date and Outstanding Shares..................................... 22
Intentions and Agreements to Vote...................................... 22
Voting of Proxies...................................................... 22
Vote Required.......................................................... 23
Quorum; Abstentions and Broker Non-Votes............................... 23
Solicitation of Proxies and Expenses................................... 23
THE MERGER AND RELATED TRANSACTIONS...................................... 24
General................................................................ 24
Background of the Merger............................................... 25
Hologic's Reasons for the Merger....................................... 27
FluoroScan's Reasons for the Merger.................................... 28
Opinion of FluoroScan's Financial Advisor.............................. 29
Selection and Compensation of FluoroScan's Financial Advisor........... 32
Recommendation of FluoroScan Board of Directors........................ 32
Interests of Certain Persons in the Merger............................. 32
Material Contacts Between Hologic and FluoroScan....................... 34
Representations, Warranties and Covenants.............................. 34
Conduct of Business of FluoroScan Pending the Merger................... 35
No Solicitation........................................................ 35
Conditions to the Merger............................................... 36
Effective Time......................................................... 37
Termination............................................................ 37
Termination Fee and Expenses........................................... 38
Option Agreement with Certain Stockholders............................. 39
Conversion of Shares; Procedures for Exchange of Certificates.......... 39
Certain Federal Income Tax Matters..................................... 40
Accounting Treatment................................................... 41
Federal Securities Law Consequences.................................... 42
Regulatory Matters..................................................... 42
Nasdaq National Market Listing......................................... 43
No Appraisal Rights.................................................... 43
Waiver and Amendment................................................... 43
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA.......................... 44
HOLOGIC UNAUDITED SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL DATA... 47
COMPARATIVE MARKET PRICE DATA............................................ 48
INFORMATION REGARDING HOLOGIC............................................ 50
HOLOGIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.................................................... 64
INFORMATION REGARDING FLUOROSCAN......................................... 70
FLUOROSCAN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION................................................ 77
HOLOGIC MANAGEMENT....................................................... 81
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN TRANSACTIONS....................................................... 88
PRINCIPAL STOCKHOLDERS OF HOLOGIC.......................................... 89
PRINCIPAL STOCKHOLDERS OF FLUOROSCAN....................................... 90
DESCRIPTION OF HOLOGIC COMMON STOCK........................................ 91
COMPARISON OF RIGHTS OF STOCKHOLDERS OF HOLOGIC AND FLUOROSCAN............. 94
LEGAL MATTERS.............................................................. 95
EXPERTS.................................................................... 95
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
APPENDIX A--AGREEMENT AND PLAN OF MERGER (INCLUDING EXHIBITS).............. A-1
APPENDIX B--OPINION OF RODMAN & RENSHAW, INC. ............................. B-1
</TABLE>
4
<PAGE>
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement/Prospectus, including the Appendices hereto. This
summary does not contain a complete statement of all material information
relating to the Merger Agreement and the Merger and is subject to, and
qualified in its entirety by, the more detailed information and financial
statements contained elsewhere in this Proxy Statement/Prospectus. FluoroScan
stockholders are urged to carefully read this Proxy Statement/Prospectus and
the attached Appendices in their entirety. Forward-looking statements made in
this Proxy Statement/Prospectus are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. All forward-looking
statements involve risks and uncertainties, and actual results could differ
materially from those set forth in the forward-looking statements contained
herein, including as a result of the risks described below under "Risk
Factors."
THE COMPANIES
HOLOGIC
Hologic, Inc., a Delaware corporation ("Hologic"), 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. Hologic 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, Hologic
introduced its fourth generation of DXA bone densitometers, its clinically
oriented QDR(R) 4500 ACCLAIM(TM) product line. Hologic is also developing
products that it believes will complement its DXA product line, including an
ultrasound bone analyzer, the Sahara(TM) and, through a joint development
effort with another company, a diagnostic strip test to detect biochemical
markers that indicate the rate of a patient's bone loss. The mailing address of
Hologic's principal executive offices is: 590 Lincoln Street, Waltham,
Massachusetts 02154, and its telephone number is: (617) 890-2300.
FENWAY ACQUISITION CORP.
Fenway Acquisition Corp., a wholly-owned subsidiary of Hologic ("Merger
Sub"), is a newly formed Delaware corporation created for the sole purpose of
consummating the transactions contemplated by the Merger Agreement. Merger Sub
has not conducted any activities other than those incident to its formation,
its execution of the Merger Agreement and its participation in the preparation
of this Proxy Statement/Prospectus. As a result of the Merger, Merger Sub will
be merged with and into FluoroScan, with FluoroScan surviving the Merger and
becoming a wholly-owned subsidiary of Hologic. The mailing address and
telephone number of Merger Sub are the same as those of Hologic.
FLUOROSCAN
FluoroScan Imaging Systems, Inc., a Delaware corporation ("FluoroScan"),
manufactures and distributes the FluoroScan Imaging System(TM) (the "FluoroScan
System"), a low intensity, real time X-ray imaging device which provides high
resolution images at radiation levels and at a cost well below those of
conventional X-ray and fluoroscopic equipment. The FluoroScan System technology
is based on a micro channel plate image intensifier commonly known as a "night
vision" intensifier. To date, FluoroScan has sold the FluoroScan System
primarily to hospitals and surgery centers for use by orthopedic surgeons in
the operating room and, to a lesser extent, for other medical uses. FluoroScan
was incorporated in Delaware in 1984 under the name HealthMate, Inc.
("HealthMate"), as the successor to HealthMate of Illinois, Inc. and Lixiscope
of America, Inc., which were incorporated in Illinois in 1982 and 1981,
respectively. The mailing address of FluoroScan's principal executive offices
is: 650-B Anthony Trail, Northbrook, Illinois 60062, and its telephone number
is: (847)564-5400.
5
<PAGE>
RECENT DEVELOPMENTS
HOLOGIC
For the three and nine months ended June 29, 1996, Hologic reported revenues
of $22.8 million and $56.3 million, respectively, as compared with revenues of
$11.3 million and $30.5 million for the same periods ended June 24, 1995.
Hologic also reported net income for the three and nine months ended June 29,
1996 of $3.9 million, or $.32 per share, and $8.3 million, or $.76 per share,
respectively, as compared with net income of $490,000, or $.06 per share, and
$1.3 million, or $.15 per share, for the same periods ended June 24, 1995. See
"Risk Factors."
FLUOROSCAN
For the three and six months ended June 30, 1996, FluoroScan reported net
sales of $3.4 million and $6.9 million, respectively, as compared with net
sales of $3.6 million and $6.1 million for the same periods ended June 30,
1995. FluoroScan also reported net income for the three and six months ended
June 30, 1996 of $170,000, or $0.05 per share, and $570,000, or $0.16 per
share, respectively, as compared with $420,000, or $0.12 per share, and
$760,000, or $0.22 per share, for the corresponding periods ended June 30,
1995. See "Risk Factors."
THE SPECIAL MEETING
TIME, PLACE AND DATE
A Special Meeting of the stockholders of FluoroScan will be held at the
offices of Katten Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois
60661, on Thursday, August 29, 1996 at 8:00 a.m., local time (including any and
all adjournments or postponements thereof, the "Special Meeting").
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of FluoroScan Common Stock will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement and
the Merger. Stockholders of FluoroScan will also consider and vote upon any
other matter that may properly come before the Special Meeting.
VOTE REQUIRED; RECORD DATE
The affirmative vote of the holders of a majority of the outstanding shares
of FluoroScan Common Stock entitled to vote at the Special Meeting is required
for the approval and adoption of the Merger Agreement and the Merger. Holders
of FluoroScan Common Stock are entitled to one vote per share. Only holders of
FluoroScan Common Stock at the close of business on August 5, 1996 (the "Record
Date") will be entitled to notice of, and to vote at, the Special Meeting.
INTENTIONS AND AGREEMENTS TO VOTE
Each of the directors and executive officers of FluoroScan has advised
FluoroScan that he intends to vote all shares of FluoroScan Common Stock over
which he has voting control (a total of 1,701,428 or approximately 36.8% of the
outstanding shares of FluoroScan Common Stock as of the Record Date) in favor
of the Merger. Moreover, Larry S. Grossman and Arlen L. Issette, the Chief
Executive Officer and President of FluoroScan, respectively, have entered into
agreements with Hologic pursuant to which they have agreed to vote, and have
granted Hologic irrevocable proxies with respect to, all shares of FluoroScan
Common Stock over which they own or have voting control (a total of 1,697,028
shares, or approximately 36.7% of the outstanding shares of FluoroScan Common
Stock as of the Record Date) in favor of the Merger. See "The Special Meeting--
Intentions and Agreements to Vote."
6
<PAGE>
THE MERGER
EFFECTS OF THE MERGER
The Merger will become effective after satisfaction of all conditions to the
Merger Agreement and on the date the Articles of Merger are duly filed with the
Secretary of State of the State of Delaware (the "Effective Time"). Assuming
all of the conditions to the Merger are fulfilled, it is expected that the
Effective Time will occur on August 29, 1996, or as soon thereafter as
practicable. Upon consummation of the Merger, FluoroScan will become a wholly-
owned subsidiary of Hologic, and the stockholders of FluoroScan will become
stockholders of Hologic.
CONVERSION OF SHARES
At the Effective Time, each share of FluoroScan Common Stock issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive .31069 shares of Hologic Common Stock, subject to adjustment
as described below (the "Conversion Ratio"). If the average closing price per
share of the Hologic Common Stock as quoted on the Nasdaq National Market for
the ten trading days ending two business days prior to the Effective Time (the
"Average Market Value") is greater than $50.29, the Conversion Ratio shall be
adjusted to equal $15.63 divided by the Average Market Value, and (ii) if the
Average Market Value is less than $30.17, at Hologic's election the Conversion
Ratio will be adjusted to equal $9.37 divided by the Average Market Value. If
the Average Market Value is less than $30.17, and Hologic does not elect to
adjust the Conversion Ratio, the Board of Directors of FluoroScan may elect to
terminate the Merger Agreement and the Merger. Hologic will not be required to
issue fractional shares of Hologic Common Stock in connection with the Merger.
In lieu of any fractional shares of Hologic Common Stock that would otherwise
be issued to FluoroScan stockholders, such stockholders will receive cash in
the amount of the Conversion Ratio multiplied by the Average Market Value.
Holders of FluoroScan Common Stock shall also have the right to receive
together with each share of Hologic Common Stock issued in connection with the
Merger, an associated common stock purchase right ("Hologic Purchase Right")
pursuant to the Rights Agreement dated as of December 22, 1992, as amended (the
"Rights Agreement"), between Hologic and American Stock Transfer & Trust
Company, as Rights Agent. References herein to Hologic Common Stock issuable in
the Merger shall be deemed to include the associated Hologic Purchase Rights.
See "The Merger and Related Transactions--General," "--Conversion of Shares;
Procedures for Exchange of Certificates."
CONVERSION OF OPTIONS
At the Effective Time, each outstanding option to purchase FluoroScan Common
Stock (the "FluoroScan Plan Options") granted under FluoroScan's 1994 Amended
and Restated Stock Incentive Plan, as amended, (the "FluoroScan 1994 Plan"),
the 1995 Stock Incentive Plan (the "FluoroScan 1995 Plan") and the 1994
Directors Stock Option Plan (the "FluoroScan Directors Plan" and, collectively,
the "FluoroScan Option Plans"), and each option to purchase FluoroScan units
(the "FluoroScan Units"), with each FluoroScan Unit consisting of one share of
FluoroScan Common Stock and a warrant to purchase one share of FluoroScan
Common Stock (the "FluoroScan Unit Options," collectively with the FluoroScan
Plan Options, the "FluoroScan Options"), will be assumed by Hologic. Each
FluoroScan Option so assumed shall continue to have, and be subject to, the
same terms and conditions set forth in the FluoroScan Option prior to the
Effective Time, except that (a) each FluoroScan Plan Option will be exercisable
for that number of whole shares of Hologic Common Stock equal to the number of
shares of FluoroScan Common Stock that were issuable upon exercise of the
FluoroScan Plan Option immediately prior to the Effective Time multiplied by
the Conversion Ratio, and (b) each FluoroScan Unit Option shall be exercisable
for that number of whole Hologic units, with each Hologic unit consisting of
one share of Hologic Common Stock and a warrant to purchase one share of
Hologic Common Stock (a "Hologic Unit"), equal to the number of FluoroScan
Units that were issuable upon exercise of the FluoroScan Unit Option
immediately prior to the Effective Time multiplied by the Conversion Ratio, and
(c) the per share exercise price for the Hologic Common Stock and the Hologic
Units issuable upon exercise of the FluoroScan
7
<PAGE>
Plan Options, the FluoroScan Unit Options and the warrants included in the
FluoroScan Units ("FluoroScan Unit Warrants") will be equal to the quotient
determined by dividing the exercise price at which such option or warrant was
exercisable immediately prior to the Effective Time by the Conversion Ratio.
See "The Merger and Related Transactions--General."
OPINION OF FLUOROSCAN'S FINANCIAL ADVISOR
Rodman & Renshaw, Inc. ("Rodman") has delivered its written opinion to the
FluoroScan Board of Directors dated July 18, 1996 that, as of the date of such
opinion and subject to certain assumptions, factors and limitations set forth
in such opinion, the Conversion Ratio to be offered to FluoroScan's
stockholders is fair, from a financial point of view, to such stockholders. A
copy of the opinion of Rodman, which sets forth the assumptions made, matters
considered and limitations on the review undertaken by Rodman, is attached as
Appendix B to this Proxy Statement/Prospectus. Stockholders of FluoroScan are
urged to read the opinion carefully and in its entirety. See "The Merger and
Related Transactions--Opinion of FluoroScan's Financial Advisor."
RECOMMENDATION OF THE FLUOROSCAN BOARD OF DIRECTORS
The FluoroScan Board of Directors has unanimously determined that the Merger
is fair to, and in the best interests of, the FluoroScan stockholders and has
approved the Merger Agreement and the Merger. The FluoroScan Board of Directors
unanimously recommends that FluoroScan's stockholders approve and adopt the
Merger Agreement and the Merger. See "The Merger and Related Transactions--
Background of the Merger," "--FluoroScan's Reasons for the Merger," "--
Recommendation of FluoroScan Board of Directors," and "--Interests of Certain
Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the FluoroScan Board of Directors with
respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain members of FluoroScan's management
(some of whom are members of FluoroScan's Board of Directors) and the
FluoroScan Board of Directors have certain interests in the Merger in addition
to their interests as stockholders of FluoroScan generally. Among other things,
the Merger Agreement includes provisions obligating Hologic to preserve and
assume certain indemnification rights and benefits of, and to provide liability
insurance coverage for, the directors of FluoroScan, and to become obligated
under Amended and Restated Employment Agreements with Larry S. Grossman and
Arlen L. Issette, the Chief Executive Officer and President of FluoroScan,
respectively, which were entered into on July 18, 1996 upon execution of the
Merger Agreement, pursuant to which Messrs. Grossman and Issette will continue
to serve as Chief Executive Officer and President of FluoroScan, respectively,
remain as directors of FluoroScan and become Vice Presidents of Hologic
following the consummation of the Merger. In addition, Mr. Grossman will also
become a director of Hologic at the Effective Time. In addition, the
outstanding Director Options to purchase, in the aggregate, 72,000 shares of
Fluoroscan Common Stock will entitle the holders to receive cash payments equal
to the fair market value of such shares minus their exercise price following
the Merger. Each of the holders of Director Options has agreed to waive his
right to such payment and have his Director Options assumed by Hologic in the
event that such cash payments would cause the Merger not to qualify as a
pooling of interests for accounting and financial reporting purposes. See "The
Merger and Related Transactions--Interests of Certain Persons in the Merger."
OPTION AGREEMENT WITH CERTAIN STOCKHOLDERS
As a condition to entering into the Merger Agreement, on July 18, 1996,
Hologic entered into a Stockholder Option Agreement with Messrs. Grossman and
Issette (the "Stockholder Option Agreement"). Under the Stockholder Option
Agreement, Messrs. Grossman and Issette have granted Hologic an option, under
certain circumstances if the Merger is not consummated, to purchase the shares
of FluoroScan Common Stock held by them at an exercise price equal to the
Conversion Ratio. The number of shares of FluoroScan Common Stock
8
<PAGE>
covered by the Stockholder Option Agreements is 1,467,152 which constitutes
approximately 31.7% of the number of outstanding shares of FluoroScan Common
Stock on the Record Date. See "The Merger and Related Transactions--Option
Agreement with Certain Stockholders."
CONDITIONS TO THE MERGER
In addition to the requirement that the stockholders of FluoroScan approve
the Merger, consummation of the Merger is subject to a number of other
conditions that, if not satisfied or waived, may result in the termination of
the Merger Agreement. Each party's obligation to consummate the Merger is
conditioned upon, among other things, the accuracy of the other party's
representations, the other party's performance of its covenants, absence of
certain litigation, absence of material adverse change to the business of the
other party, and favorable legal opinions to the effect that the Merger will be
treated for federal income tax purposes as a tax-free reorganization. In
addition, Hologic may terminate the Merger Agreement if it does not receive
favorable letters from the respective independent accountants of Hologic and
FluoroScan that the Merger will qualify as a pooling of interests for
accounting and financial reporting purposes. See "The Merger and Related
Transactions--Conditions to the Merger."
TERMINATION; TERMINATION FEES AND EXPENSES
The Merger Agreement is subject to termination: (i) by the mutual consent of
the Boards of Directors of Hologic and FluoroScan, (ii) by either party, if,
without the fault of such terminating party, the Merger shall not have been
consummated on or before November 30, 1996, (iii) by either party, if there
shall be issued a final order by any court of competent jurisdiction or other
governmental body in the United States restraining, enjoining or otherwise
prohibiting the Merger, (iv) by either party if the Merger Agreement shall fail
to receive the requisite approval of the stockholders of FluoroScan, (v) by the
Board of Directors of FluoroScan if the Average Market Value of the Hologic
Common Stock is less than $30.17 and Hologic does not elect to adjust the
Conversion Ratio to equal $9.37 divided by the Average Market Value, and (vi)
in certain other circumstances. Under certain circumstances, if the Merger
Agreement is terminated, Hologic may be entitled to receive from FluoroScan a
termination fee of $2.4 million and the payment of up to $1.5 million for fees
and expenses relating to the transaction. Under certain other circumstances, if
the Merger Agreement is terminated, Hologic or FluoroScan may be entitled to
receive from the other the payment of up to $1.5 million for fees and expenses
relating to the transaction. See "The Merger and Related Transactions--
Termination" and "--Termination Fee and Expenses."
CERTAIN FEDERAL INCOME TAX MATTERS
The Merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). A
condition to the obligations of Hologic and FluoroScan to consummate the Merger
is the receipt by them of an opinion of legal counsel to the effect that, among
other things: (i) the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code: (ii) each of Hologic, Merger Sub and
FluoroScan will be a party to the reorganization within the meaning of Section
368(b) of the Code; and (iii) no gain or loss will be recognized by a holder of
FluoroScan Common Stock as a result of the Merger with respect to shares of
FluoroScan Common Stock converted solely into shares of Hologic Common Stock
(except with respect to cash, if any, received in lieu of fractional share
interests). However, consummation of the Merger is not conditioned upon the
receipt of a private letter ruling from the Internal Revenue Service as to the
tax consequences of Merger. See "The Merger and Related Transactions--Certain
Federal Income Tax Matters."
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Hologic and FluoroScan have been advised by,
and will receive letters from Arthur Andersen LLP, Hologic's independent
accountants, and BDO Seidman, LLP, FluoroScan's independent accountants, to the
effect that, the Merger will qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method
9
<PAGE>
of accounting, the recorded assets and liabilities of Hologic and FluoroScan
will be carried forward to Hologic at their recorded amounts, the consolidated
income of Hologic will include income of Hologic and FluoroScan for the entire
fiscal year in which the combination occurs, and the reported income of the
separate companies for prior periods will be combined and restated as
consolidated income of Hologic.
REGULATORY APPROVALS
Neither Hologic nor FluoroScan is aware of any governmental or regulatory
approvals required for the consummation of the Merger other than (i) compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
" HSR Act"), as described below, (ii) compliance with applicable securities
laws and (iii) certain filings under Delaware Law.
The Merger is subject to the HSR Act and the rules and regulations
thereunder, which provide that certain transactions may not be consummated
until required information and materials have been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the
Federal Trade Commission (the "FTC") and certain waiting periods have been
expired or been terminated. On August 1, 1996, Hologic and FluoroScan filed the
required information and materials with the Antitrust Division and FTC and
requested early termination of the waiting period under the HSR Act. See "The
Merger and Related Transactions--Regulatory Approvals."
NO APPRAISAL RIGHTS
Under Delaware Law, the holders of FluoroScan Common Stock are not entitled
to any appraisal rights in connection with the Merger. See "The Merger and
Related Transactions--No Appraisal Rights."
COMPARATIVE RIGHTS OF STOCKHOLDERS
See "Comparison of Rights of Stockholders of Hologic and FluoroScan" for a
summary of certain differences between the rights of holders of Hologic Common
Stock and the rights of holders of FluoroScan Common Stock.
EXCHANGE OF STOCK CERTIFICATES
If the Merger becomes effective, the holders of record of FluoroScan Common
Stock will be required to surrender their stock certificates in exchange for
certificates representing shares of Hologic Common Stock and a cash payment in
lieu of fractional shares, if any. Certificates should not be surrendered at
this time. See "The Merger and Related Transactions--Conversion of Shares;
Procedures for Exchange of Certificates."
COMPARATIVE PER SHARE MARKET PRICE DATA
HOLOGIC
Hologic'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 Hologic Common Stock, as reported by the
Nasdaq National Market. All sales prices have been adjusted to reflect a two-
for-one stock split in the form of a stock dividend effected by Hologic in
March 1996.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1994 Fiscal Year
First Quarter ended December 26, 1993.......................... $ 2.50 $ 1.75
Second Quarter ended March 26, 1994............................ 3.69 1.69
Third Quarter ended June 25, 1994.............................. 7.00 3.19
Fourth Quarter ended September 24, 1994........................ 9.00 4.88
1995 Fiscal Year
First Quarter ended December 31, 1994.......................... 9.06 6.13
Second Quarter ended March 25, 1995............................ 9.38 6.63
Third Quarter ended June 24, 1995.............................. 8.69 4.50
Fourth Quarter ended September 30, 1995........................ 12.56 7.69
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1996 Fiscal Year
First Quarter ended December 30, 1995............................ 22.75 10.38
Second Quarter ended March 30, 1996.............................. 26.75 17.25
Third Quarter ended June 29, 1996................................ 49.50 21.00
Fourth Quarter ending September 28, 1996 (through August 5,
1996)........................................................... 49.00 27.50
</TABLE>
FLUOROSCAN
FluoroScan's Common Stock is traded on the Nasdaq National Market under the
symbol "FLRO." The following table sets forth, for the periods indicated, the
high and low sales prices per share of FluoroScan Common Stock, as reported by
the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1994 Fiscal Year
Third Quarter ended September 30, 1994(1)........................ $8.06 $6.00
Fourth Quarter ended December 31, 1994........................... 8.38 5.69
1995 Fiscal Year
First Quarter ended March 31, 1995............................... 9.00 6.00
Second Quarter ended June 30, 1995............................... 8.25 5.75
Third Quarter ended September 30, 1995........................... 10.13 6.50
Fourth Quarter ended December 31, 1995........................... 10.13 6.13
1996 Fiscal Year
First Quarter ended March 31, 1996............................... 8.75 5.75
Second Quarter ended June 30, 1996............................... 11.13 6.38
Third Quarter ending September 30, 1996 (through August 5,
1996)........................................................... 11.63 6.75
</TABLE>
- --------
(1) FluoroScan's initial public offering was completed on July 11, 1994.
RECENT MARKET PRICES
The following table sets forth the closing prices per share of the Common
Stock of Hologic and FluoroScan, respectively, on the Nasdaq National Market on
July 18, 1996, the last trading day preceding the public announcement of the
Merger, and on August 5, 1996, the latest practicable trading day before the
printing of this Proxy Statement/Prospectus, and the equivalent per share
prices of the FluoroScan Common Stock based on the closing prices of the
Hologic Common Stock multiplied by the Conversion Ratio:
<TABLE>
<CAPTION>
HOLOGIC FLUOROSCAN FLUOROSCAN
COMMON STOCK COMMON STOCK EQUIVALENT
------------ ------------ ----------
<S> <C> <C> <C>
July 18, 1996........................... $39.38 $ 7.88 $12.23
August 5, 1996.......................... $37.25 $11.38 $11.57
</TABLE>
NUMBER OF HOLDERS
As of the Record Date, there were 262 holders of record of Hologic Common
Stock and 92 holders of record of FluoroScan Common Stock, as shown on the
records of their respective transfer agents.
DIVIDEND POLICY
Neither Hologic nor FluoroScan has ever paid or declared any dividends on its
stock. Hologic's current policy is to retain all of its earnings to finance
future growth.
FLUOROSCAN STOCKHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
HOLOGIC COMMON STOCK AND FLUOROSCAN COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS
TO THE MARKET PRICES OF HOLOGIC COMMON STOCK OR FLUOROSCAN COMMON STOCK AT, OR
IN THE CASE OF HOLOGIC COMMON STOCK AFTER, THE EFFECTIVE TIME OF THE MERGER.
11
<PAGE>
HOLOGIC SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SUMMARY FINANCIAL DATA
The following selected summary financial data of Hologic have been derived
from its respective historical consolidated financial statements and should be
read in conjunction with such consolidated financial statements and notes
thereto.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED(2) SIX MONTHS ENDED
--------------------------------------------------------- -------------------
SEPTEMBER 30,
--------------- SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 25, MARCH 30,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues................ $17,057 $26,270 $24,848 $38,484 $43,400 $19,230 $33,521
Income (loss) before
income taxes
(3)(4)(5).............. 1,015 2,102 (2,075) 4,330 2,520 1,117 6,051
Net income (loss)....... 701 1,479 (1,775) 2,995 1,870 797 4,331
Net income (loss) per
common and common
equivalent share:
Primary (3)(4)(5)..... $ 0.09 $ 0.18 ($0.23) $ 0.36 $ 0.21 $ 0.09 $ 0.42
Fully diluted (5)..... $ 0.34 $ 0.20
Weighted average number
of common and common
equivalent shares
outstanding (1):
Primary............... 8,099 8,101 7,860 8,390 8,752 8,799 10,298
Fully diluted......... 8,684 9,151
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------- SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 30,
1991 1992 1993 1994 1995 1996
------- ------- ------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital......... $15,503 $16,427 $14,540 $17,688 $19,370 $74,559
Total liabilities....... 3,135 4,578 5,854 8,625 11,190 12,868
Total assets............ 19,809 22,695 22,166 28,497 33,862 91,486
Stockholders' equity.... 16,674 18,117 16,312 19,872 22,672 78,618
</TABLE>
- --------
(1) All share and per share data has been adjusted to reflect a two-for-one
stock split in the form of a stock dividend on March 25, 1996.
(2) Hologic changed its fiscal year end from September 30 to the last Saturday
in September effective with the fiscal year ended September 25, 1993.
(3) Fiscal 1991 expenses include litigation expenses of $1.2 million before
income taxes (approximately $800,000 after income taxes or $0.10 per
share).
(4) Fiscal 1993 expenses include a restructuring charge of $900,000 (before and
after income taxes or $0.11 per share) relating to the reorganization of
Hologic's European operations.
(5) Fiscal 1995 expenses include litigation expenses of $2.5 million before
income taxes (approximately $1.8 million after income taxes or $0.21 per
share) primarily relating to certain patent litigation. A definitive
agreement was reached by Hologic and the other party to this litigation in
November 1995 settling all outstanding disputes. See "Information Regarding
Hologic-Patents and Proprietary Rights."
12
<PAGE>
FLUOROSCAN SELECTED HISTORICAL FINANCIAL DATA
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SUMMARY FINANCIAL DATA
The following selected summary financial data of FluoroScan have been derived
from the historical consolidated financial statements and should be read in
conjunction with such consolidated financial statements and notes thereto
included elsewhere in this Proxy Statement/Registration Statement.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE MONTHS ENDED
DECEMBER 31 MARCH 31
--------------------- -------------------
1993 1994 1995 1995 1996
------ ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales................................. $6,928 $9,171 $13,147 $ 2,491 $ 3,502
Income before income taxes................ 973 2,065 2,342 539 678
Net income................................ 1,458 1,773 1,479 341 404
Net income per share...................... $ .52 $ .57 $ .43 $ .10 $ .12
Weighted average common shares and common
share equivalents outstanding............ 2,787 3,107 3,473 3,507 3,495
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
------------- --------
1994 1995 1996
---- ------ --------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................................... $6,280 $7,820 $8,248
Total liabilities....................................... 801 1,361 1,482
Total assets............................................ 8,173 10,221 10,746
Stockholders' equity.................................... 7,371 8,860 9,264
</TABLE>
13
<PAGE>
HOLOGIC UNAUDITED SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected summary unaudited combined pro forma financial data is
derived from the pro forma combined condensed financial statements appearing
elsewhere herein, which give effect to the Merger as a pooling of interests,
and should be read in conjunction with such pro forma statements and notes
thereto.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the combination had been consummated, nor is it
necessarily indicative of the future operating results or financial position of
Hologic or FluoroScan.
<TABLE>
<CAPTION>
SIX
FISCAL YEARS ENDED MONTHS ENDED
----------------------------------------- ------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 30,
1993 1994 1995 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
COMBINED STATEMENT OF
OPERATIONS DATA:
Revenues................ $31,776 $47,654 $56,547 $40,901
Income (loss) before
income taxes........... (1,102) 6,395 4,861 7,352
Net income (loss)....... (317) 4,768 3,348 5,138
Net income (loss) per
common and common
equivalent share:
Primary............... $ (0.03) $ 0.49 $ 0.33 $ 0.44
Fully diluted......... $ 0.47 $ 0.32
Weighted average number
of common and common
equivalent shares
outstanding:
Primary............... 9,296 9,826 10,188 11,735
Fully diluted......... 10,120 10,587
</TABLE>
<TABLE>
<CAPTION>
MARCH 30,
1996
---------
<S> <C>
COMBINED BALANCE SHEET DATA:
Working capital................................................... $ 82,808
Total liabilities................................................. 14,350
Total assets...................................................... 102,232
Stockholders' equity.............................................. 87,882
</TABLE>
14
<PAGE>
COMPARATIVE HISTORICAL AND UNAUDITED PER SHARE DATA
The following tables set forth the historical per share data of Hologic and
FluoroScan and combined per share data on an unaudited pro forma basis after
giving effect to the Merger, on a pooling of interest basis, and after giving
effect to the issuance of 1,436,287 shares of Hologic Common Stock in the
Merger assuming 4,622,894 shares of FluoroScan Common Stock outstanding at the
Effective Time and a Conversion Ratio of .31069. This data should be read in
conjunction with the selected historical and pro forma financial data, the
unaudited pro forma combined condensed financial statements and notes thereto
included elsewhere in this Proxy Statement/Prospectus and the separate
historical financial statements of Hologic and FluoroScan included herein. The
unaudited pro forma combined financial data are not necessarily indicative of
the operating results that would have been achieved had the Merger been in
effect as of the beginning of the periods presented and should not be construed
as representative of future operations. Neither Hologic nor FluoroScan has ever
declared or paid cash dividends on its respective shares of Common Stock.
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
-------------------------------------
PERIOD
FISCAL YEARS ENDED
--------------------- -------------
MARCH 30,
1993 1994 1995 1996
------ ------ ------ ---------
<S> <C> <C> <C> <C>
HOLOGIC HISTORICAL:
Net income (loss):
Primary...................... $(0.23) $ 0.36 $ 0.21 $0.42
Fully diluted................ $ 0.34 $ 0.20
Book value(1)................ $ 2.75 $7.12
FLUOROSCAN HISTORICAL:
Net income................... $ 0.52 $ 0.57 $ 0.43 $0.12
Book value(2)................ $ 2.55 $2.67
PRO FORMA COMBINED HOLOGIC AND
FLUOROSCAN:
Net income (loss):(3)
Primary...................... $(0.03) $ 0.49 $ 0.33 $0.44
Fully diluted................ $ 0.47 $ 0.32
Book Value(3)................ $ 3.26 $7.04
EQUIVALENT PRO FORMA COMBINED-
FLUOROSCAN:
Net income (loss):(4)
Primary...................... $(0.01) $ 0.15 $ 0.10 $0.14
Fully diluted................ $ 0.15 $ 0.10
Book value(4)................ $ 1.01 $2.19
</TABLE>
- --------
(1) Historical book value per share is computed by dividing total stockholders'
equity by the number of shares of Hologic Common Stock outstanding at the
end of the period.
(2) Historical book value per share is computed by dividing total stockholders'
equity by FluoroScan Common Stock outstanding at the end of the period.
(3) Pro forma combined net income (loss) per share is computed by dividing pro
forma net income by the Hologic weighted average number of common and
common equivalent shares after giving effect to the assumed 1,436,287
shares of Hologic Common Stock to be issued in connection with the Merger.
Pro forma combined book value per share is computed by dividing pro forma
combined stockholders' equity by the number of shares of Hologic Common
Stock after giving effect to the assumed 1,436,287 shares of Hologic Common
Stock to be issued in connection with the Merger. Pro forma book value per
share does not reflect the exercise of outstanding stock options.
(4) Equivalent pro forma combined net income (loss) and book value per share
are computed by multiplying the pro forma combined net income (loss) per
share and book value per share by the Conversion Ratio of .31069.
15
<PAGE>
RISK FACTORS
In addition to the other information in this Proxy Statement/Prospectus, the
following risk factors should be considered carefully by the FluoroScan
stockholders in determining whether to vote for the approval and adoption of
the Merger Agreement and the Merger, and the acquisition of the securities
offered hereby. For the period following the Merger, references to the
business and operations of Hologic should be considered to refer to Hologic
and its subsidiaries, including FluoroScan, unless the context otherwise
requires. Forward-looking statements made in this section and elsewhere in
this Proxy Statement/Prospectus are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve risks and uncertainties, and actual results
could differ materially from those set forth in the forward-looking statements
contained herein for a variety of reasons, including but not limited to the
risks outlined in this section.
RISKS RELATING TO THE MERGER
Integration of the Two Companies. Hologic and FluoroScan have each entered
into the Merger Agreement with the expectation that the Merger will benefit
both Hologic and FluoroScan. See "The Merger--Reasons for the Merger."
Achieving the anticipated benefits from the Merger will depend in part upon
whether the businesses of Hologic and FluoroScan can be managed and
coordinated in a timely, efficient and effective manner, and there can be no
assurance that this will occur. The difficulties of such integration may be
increased by the necessity of coordinating geographically separated
organizations (Hologic and FluoroScan are based in the Boston and Chicago
metropolitan area, respectively) and integrating personnel with disparate
background and corporate cultures. The integration process will require the
dedication of management resources that will detract attention from the daily
business of Hologic and FluoroScan. In addition, Hologic anticipates
integrating FluoroScan products into its foreign sales and distribution
channels. The risk inherent in such integration may be greater than those
associated with the integration of FluoroScan's and Hologic's domestic
operations. See "Risk Factors--Reliance on Foreign Sales." The timing and
manner of the implementation of decisions made with respect to the ongoing
business of the combined companies following the Merger will materially affect
the operations of Hologic and FluoroScan. This integration process may cause
an interruption of, or a loss of momentum in, the activities of either or both
of the businesses of Hologic and FluoroScan, which could have a material
adverse effect on Hologic's business.
Transaction Costs. Hologic and FluoroScan estimate that they will incur
direct transaction costs of approximately $1.8 million associated with the
Merger. These transaction costs will be expensed in the period incurred under
the pooling-of-interests method of accounting for business combinations. As a
result, the earnings of the combined entity will be adversely affected. This
decrease in Hologic's earnings may have a significant impact on the market
price of Hologic Common Stock. This amount is a preliminary estimate only and
therefore subject to change. There can be no assurance that Hologic and
FluoroScan will not incur additional charges to reflect costs associated with
the Merger.
RISKS RELATING TO HOLOGIC AND FLUOROSCAN
The risk factors in this subsection apply to each of Hologic and FluoroScan
individually, where appropriate, and also are expected to apply to Hologic
following the consummation of the Merger.
Dependence of Product Sales on Availability and Acceptance of New Drug
Therapies. Hologic believes that it is important for the continued growth of
its sales of bone densitometers and other related products, 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. Similarly, FluoroScan believes that it is important
for the continued growth of sales of its products that the efficacy of
therapies that could broaden the use of minimally invasive orthopedic surgery
such as synthetic bone materials be demonstrated, that broadened regulatory
approval of those therapies be granted in the United States and elsewhere, and
once approved, that these new therapies gain acceptance. There can be no
assurance that any therapies under development or in clinical trials will
prove to be
16
<PAGE>
effective, obtain FDA approval or, once approved, gain acceptance. 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 Hologic's business.
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 measurers
could limit the use of Hologic's and FluoroScan's products, reduce
reimbursement available for such use, or adversely affect the use of new
therapies for which Hologic's or FluoroScan's products may be targeted. As a
result, such reforms or cost containment measures could materially and
adversely affect sales of each of Hologic's and FluoroScan'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 Hologic'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. Hologic believes that it is important for the continued growth
of sales of Hologic'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 for Hologic's products
could have a material adverse effect on Hologic's business.
Developing Markets; Need to Broaden Market Acceptance. The continued success
of Hologic's products that address the clinical market for the early diagnosis
and monitoring of osteoporosis, 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 Hologic's ability to broaden sales of its products to these
physician groups. In order to penetrate this market more effectively, Hologic
has expanded its sales and marketing activities, including increasing its
sales force, advertising and participation in trade shows. Historically,
FluoroScan has marketed its products to hospitals and surgery centers for use
by orthopedic surgeons in the operating room. The continued success of
FluoroScan's products will be dependent upon its ability to broaden its sales
to orthopedic and podiatric physician groups. There can be no assurance that
either Hologic or FluoroScan will be successful in obtaining broader market
acceptance for its products. Failure to do so could have a material adverse
effect on Hologic's business.
Product Development; Uncertainty of Market Acceptance. Hologic's and
FluoroScan's success will depend upon their ability to enhance their existing
products, to develop new products to meet regulatory and customer requirements
and to achieve market acceptance. Hologic is developing an enhanced ultrasound
bone analyzer, the Sahara and, together with Serex, Inc., a diagnostic strip
test to detect biochemical markers that indicate the rate of a patient's bone
loss. FluoroScan is developing a new generation of its FluoroScan imaging
system, including a medical version of the FluoroScan II and a model with a
six-inch field-of-view. The development of these products will be subject to
all of the risks associated with new product development, including
unanticipated delays, expenses, technical problems or other difficulties that
could result in the abandonment or substantial change in the commercialization
of these new products. Given the uncertainties inherent in new product
development and introduction, there can be no assurance that Hologic or
FluoroScan will be successful in introducing products or product enhancements
on a timely basis, if at all, or that Hologic or FluoroScan will be able to
market these products and product enhancements once developed. Failure to do
so could have a material adverse effect on Hologic's business.
17
<PAGE>
Obsolescence and Rapid Technological Change. The markets for Hologic's and
FluoroScan's products are highly competitive and subject to rapid
technological change and evolving industry requirements and standards. Hologic
and FluoroScan believe that these trends will continue into the foreseeable
future. 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 Hologic's products.
These other systems include single photon absorptiometry, radiographic
absorptionetry, quantitative computed topography, ultrasound and biochemical
markers. Although Hologic 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
Hologic's DXA market. Hologic's products may also compete with sales of used
and refurbished systems. In addition, many companies, research institutions
and universities may be working in a number of engineering and radiology
disciplines similar to those being used and developed by FluoroScan. As a
result, FluoroScan's products may become subject to competition from products
using technologies other than those developed by FlouroScan, which may render
FluoroScan's products obsolete or less attractive to customers if FluoroScan
cannot participate in such new technologies. No assurance can be given that
continuing improvements in current or new technologies will not make them
technically equivalent or superior to Hologic's or FluoroScan's technology, in
addition to providing cost or other advantages.
Competition. Hologic competes directly with a number of companies with
significant financial resources, including Lunar, Norland Medical Systems,
Aloha and Hitachi, each of which has developed DXA systems to measure bone
density. FluoroScan competes directly with a limited number of companies
including Xi Tec, Lunar, OEC Medical and Lixi. Xi Tec manufactures products
comparable to FluoroScan's pursuant to a sublicense from FluoroScan which
expires in July 1997. OEC Medical and Lunar each manufacture small C-Arm
imaging systems that do not use FluoroScans patented technology. Lixi
manufactures an X-ray tube version, Lixiscope, only for the industrial
marketplace. FluoroScan also competes indirectly with manufacturers of
conventional C-Arm image intensifiers including Philips, Siemans, General
Electric, OEC Medical, Fischer Imaging and Picker International. These
competitors have substantially greater financial and marketing resources than
Hologic and FluoroScan. There can be no assurance that either Hologic or
FluoroScan will be able to compete successfully.
Quarterly Fluctuations in Operating Results. Hologic's and FluoroScan's
results of operations have been 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 Hologic's and FluoroScan's markets,
the timing of orders, the timing of expenditures in anticipation of future
sales, the mix of products sold by Hologic and FluoroScan, the introduction of
new products and product enhancements by Hologic, FluoroScan or their
respective competitors, and pricing and other competitive conditions. Hologic
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
Hologic'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, packing, 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. Hologic's and
FluoroScan'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. Hologic and
FluoroScan have obtained all necessary FDA marketing clearances for Hologic's
DXA bone densitometers and FluoroScan's FluoroScan System under the less
stringent 510(k) marketing clearance procedure. Hologic believes that its
ultrasound products and over-the-counter biochemical marker strip test under
development may
18
<PAGE>
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 for Hologic's or FluoroScan's
products could have a material adverse effect on Hologic's business.
Reliance on Serex for the Development of Biochemical Marker Strip
Test. Hologic 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 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 Hologic's future
prospects.
Reliance on Foreign Sales; Restriction on FluoroScan's Foreign Sales. In the
six month period ending March 30, 1996 and in fiscal 1995, foreign sales
accounted for approximately 56% and 75%, respectively, of Hologic's product
sales. Hologic maintains sales and service offices in Belgium, France and
Spain. The expenses and sales of these offices are denominated in local
currencies. Hologic anticipates that foreign sales and foreign denominated
sales will continue to account for a significant portion of Hologic's total
sales, which will result in a significant portion of Hologic's revenues being
subject to risks associated with foreign sales, including risks of exchange
rate fluctuations, limitations on foreign sales of high technology products
and other 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. Moreover, FluoroScan's technology is
governed by the International Traffic in Arms Regulations of the United States
Department of State. As a result, the export of FluoroScan Systems to certain
countries may be limited or prohibited. Hologic 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 Hologic's business.
Dependence on Third Party Distributors; Significant Customer. For its sales
and service activities outside of the United States, Canada and certain
European countries, Hologic is primarily dependent upon third party
distributors. In the first six months of fiscal 1996 and in fiscal 1995,
Hologic'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 Hologic's other distributors will continue to
provide sales and services for Hologic at acceptable levels, if at all, or
that Hologic would be able to replace any distributors on terms as
advantageous to Hologic should any of its existing arrangements terminate.
Further, there can be no assurance that Hologic will be able to make
arrangements with additional distributors to access new markets. Material
adverse changes in the relationship between Hologic and its distributors,
including the loss of Toyo Medic as a distributor or an adverse change in the
relationship between Hologic and Toyo Medic, or the failure of Hologic to
enter into advantageous arrangements with distributors in new markets, could
have a material adverse effect on Hologic's business.
Uncertainty of Patent and Proprietary Rights Protection. Hologic relies upon
trade secrets and patents to protect its technology. Hologic has obtained 12
patents, licensed five patents and has pending 18 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. Hologic has obtained or applied
for corresponding patents and patent applications for certain of these patents
and patent applications for certain foreign countries. There can be no
assurance that any of Hologic's patent applications will be granted or that
any patent or patent application will provide significant protection for
Hologic's products and technology. Moreover, there can be no assurance that
foreign intellectual property laws will protect Hologic's intellectual
property rights. In the absence of significant patent protection, Hologic may
be vulnerable to competitors who attempt to copy Hologic's products, processes
or technology.
Hologic had been involved in extensive patent litigation with 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.
19
<PAGE>
The agreement provides for certain royalties to be paid by each party to the
other for future sales of products using certain defined technologies. Hologic
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 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
Hologic's technology during this ten-year period in a manner that would
materially and adversely affect Hologic's business.
FluoroScan has two licenses from NASA to use and develop certain technology
that is used in its products and that are the subject of three patents held by
NASA. FluoroScan's license is exclusive in the United States. However, under
FluoroScan's license agreement with NASA, NASA retains the right to use its
technologies in connection with devices that it produces, including devices
that may be produced and marketed by NASA in direct competition with
FluoroScan. NASA also has the right to circumvent the exclusivity of the
license agreement if, in NASA's opinion, such circumvention is required to
serve the public good and the national interest of the United States, and
FluoroScan cannot serve such functions. Moreover, FluoroScan's license
agreement with NASA is exclusive only in the United States and its
territories. Accordingly, NASA retains the right to license its technologies
to others outside of the United States, where such technologies are patented
or can be patented. The technology covered by the NASA patents is not patented
in many foreign countries and may therefore not be protectable or may be
cumbersome and expensive to enforce in such countries. Therefore, a competitor
in one of these countries could reverse engineer FluoroScan's products and
manufacture and sell products in direct competition with FluoroScan outside
the United States. One of the patents, covering important technology
incorporated in FluoroScan's products, expires in July 1997 and the other two
patents expire in 2003. These patents previously had expiration dates in
February 1996 and 2002, but were extended as a result of the passage of the
General Agreement on Tariff and Trade ("GATT"). Upon expiration of a patent,
all of the technology covered by these patents will be accessible to potential
competitors, which could have a material adverse effect on FluoroScan's
business.
Acquisition Risks. Hologic expects that in addition to internal development
it will continue to seek to expand its products and technology in part through
acquisitions or strategic alliances in complimentary markets, including other
diagnostic or imaging markets, or other women's health care markets. There can
be no assurance Hologic will be successful in identifying, acquiring and
developing products and technology. If any potential acquisition opportunities
are identified, there can be no assurance that Hologic will consummate such
acquisitions or successfully integrate the technology or businesses acquired
into Hologic. Acquisitions involve a number of special risks, including the
diversion of management's attention, the assimilation of the operations and
personnel of the acquired companies, the incorporation of acquired products
into existing product lines, adverse short-term effects on reported operating
results, the amortization of acquired intangible assets, the loss of key
employees of the acquired company or business and the difficulty of presenting
a unified corporate image. No assurance can be given that any acquisition by
Hologic will or will not occur, that if an acquisition does occur it will not
materially and adversely affect Hologic or that any such acquisition will be
successful in enhancing Hologic's business. If the operations of the acquired
company do not meet expectations, Hologic may be required to restructure the
acquired business or write off the value of some or all of the assets of the
acquired business.
Attraction and Retention of Key Personnel. The future success of Hologic
will depend in large part on the continued services of its executive officers,
including the executive officers of FluoroScan, as well as Hologic'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 Hologic to hire such personnel. Competition for such personnel
is intense, and there can be no assurance that Hologic will be able to attract
and retain personnel necessary for the development of its business. FluoroScan
has been, and for the foreseeable future will continue to be, dependent upon
the services of Larry S. Grossman and Arlene L. Issette, its Chief Executive
Officer and President, respectively. Hologic has entered into Amended and
Restated Employment Agreements with Messrs. Grossman and Issette which expire
20
<PAGE>
in February 1999. There can be no assurance that either or both of Messrs.
Grossman and Issette will continue their employment after the expiration of
their employment agreements or that they will not terminate their employment
prior to such expiration. S. David Ellenbogen and Jay A. Stein, the Chief
Executive Officer and Senior Vice President, respectively, of Hologic, also
serve in similar positions at Vivid Technologies, Inc. ("Vivid"). Under a
management agreement between Hologic and Vivid, Hologic has agreed to provide
management services to Vivid, including the part-time assistance of Mr.
Ellenbogen and Dr. Stein. Mr. Ellenbogen and Dr. Stein typically devote up to
approximately 16 and eight hours per week, respectively, to Vivid. See
"Certain Transactions."
Product Liability. Hologic's and FluoroScan's businesses involve the risk of
product liability claims inherent to the medical device business. Hologic
currently maintains product liability insurance with an aggregate coverage
limit of $6.0 million per year, subject to certain deductibles and exclusions.
FluoroScan currently maintains product liability insurance with a coverage
limit of $1.0 million per occurrence, with an aggregate limit of $2.0 million
per year, subject to certain deductibles and exclusions. There can be no
assurance that Hologic's and FluoroScan's insurance will be sufficient to
protect them from product liability claims, or that product liability
insurance will be available to Hologic at a reasonable cost, if at all, in the
future. An underinsured or uninsured claim could have a material adverse
effect on Hologic's financial condition.
Anti-takeover Provisions; Management Control. Hologic's Certificate of
Incorporation and By-laws include certain provisions that may have the effect
of discouraging or preventing a change in control of Hologic. In addition,
Hologic made a rights distribution in December 1992 that could also have the
effect of discouraging or preventing a change in control of Hologic. These
provisions could limit the price that stockholders of Hologic might receive in
the future for shares of Hologic Common Stock. See "Comparison of Rights of
Stockholders of Hologic and FluoroScan" and "Description of Hologic Capital
Stock."
Volatility of Hologic Stock Price. The market price of Hologic Common Stock
has been and may continue to be highly volatile. From January 1, 1996 to
August 5, 1996, the price per share of Hologic's Common Stock has ranged from
a high of $49.50 to a low of $17.25. Factors such as quarterly fluctuations in
Hologic's results of operations, the announcement of technological innovations
or new products by Hologic or its competitors, variations in anticipated or
actual operating results, market conditions, and general economic conditions
may have a significant impact on the market price of Hologic Common Stock.
21
<PAGE>
THE SPECIAL MEETING
DATE, PLACE AND TIME OF MEETING
The Special Meeting will be held at the offices of Katten Muchin & Zavis,
525 West Monroe Street, Chicago, Illinois, 60661, on Thursday, August 29,
1996, at 8:00 a.m., local time.
RECORD DATE AND OUTSTANDING SHARES
The shares of FluoroScan Common Stock constitute the only outstanding class
of voting securities of FluoroScan. The Board of Directors of FluoroScan has
fixed August 5, 1996 as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting. Accordingly, only holders of record of shares of FluoroScan Common
Stock on the Record Date will be entitled to notice of and to vote at the
Special Meeting. As of the Record Date, there were 4,622,894 shares of
FluoroScan Common Stock outstanding, held by approximately 92 holders of
record. Each holder of record of shares of FluoroScan Common Stock on the
Record Date is entitled to cast one vote per share at the Special Meeting, in
person or by proxy.
INTENTIONS AND AGREEMENTS TO VOTE
Each of the directors and executive officers of FluoroScan has advised
FluoroScan that he intends to vote all shares of FluoroScan Common Stock over
which he has voting control (a total of 1,701,428 or approximately 36.8% of
the outstanding shares of FluoroScan Common Stock as of the Record Date) in
favor of the Merger. Moreover, Larry S. Grossman and Arlen L. Issette, the
Chief Executive Officer and President of FluoroScan, respectively, have
entered into agreements with Hologic pursuant to which they have agreed to
vote and have granted Hologic irrevocable proxies with respect to all shares
of FluoroScan Common Stock over which they hold or have voting control (a
total of 1,697,028 shares, or approximately 36.7% of the outstanding shares of
FluoroScan Common Stock as of the Record Date) in favor of the Merger.
VOTING OF PROXIES
A form of proxy for voting shares of FluoroScan Common Stock at the Special
Meeting is enclosed. All shares of FluoroScan Common Stock which are entitled
to vote and are represented at the Special Meeting by properly executed
proxies received prior to or at the Special Meeting, and not duly and timely
revoked, will be voted at the Special Meeting in accordance with the
instructions indicated on such proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH
PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE MERGER. The Board of Directors of FluoroScan knows of no other matters to
be presented at the Special Meeting other than those described in this Proxy
Statement/Prospectus. If any other matters are properly presented at the
Special Meeting for consideration, including, among other things,
consideration of a motion to adjourn or postpone the Special Meeting to
another time and/or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the enclosed form of
proxy will have discretion to vote on such matters in accordance with their
best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked or superseded
by: (i) filing with the Secretary of FluoroScan at or before the taking of the
vote at the Special Meeting, a written notice of revocation bearing a later
date than the proxy; (ii) duly executing a later dated proxy relating to the
same shares and delivering it to the Secretary of FluoroScan before the taking
of the vote at the Special Meeting; or (iii) attending the Special Meeting and
voting in person (although attendance at the Special Meeting will not in and
of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent so as to be delivered to
FluoroScan Imaging Systems, Inc., 650-B Anthony Trail, Northbrook, Illinois
60062, Attention: Secretary, or hand-delivered to the Secretary of FluoroScan,
at or before the taking of the vote at the Special Meeting.
22
<PAGE>
VOTE REQUIRED
The approval and adoption of the Merger Agreement and the Merger requires
the affirmative vote of the holders of at least a majority of the outstanding
shares of FluoroScan Common Stock entitled to vote thereon.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The presence, in person or by properly executed proxy, of the holders of
shares of FluoroScan Common Stock entitled to vote at the Special Meeting
representing a majority of the outstanding shares of FluoroScan Common Stock
as of the Record Date is necessary to constitute a quorum at the Special
Meeting. Abstentions and broker non-votes are each included in the
determination of the number of shares present for the purpose of determining
whether a quorum is present, and each is tabulated separately. In determining
whether the proposal relating to the approval and adoption of the Merger
Agreement and the Merger has been approved, abstentions and broker non-votes
will have the same effect as votes against the proposal.
SOLICITATION OF PROXIES AND EXPENSES
FluoroScan will bear the cost of the solicitation of proxies in the enclosed
form from its stockholders, which solicitation will be primarily by use of the
mails. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of FluoroScan in person or by
telephone, telegram, facsimile transmission or other means of communication.
Such directors, officers and employees will not be additionally compensated,
but may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and FluoroScan will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith. FluoroScan has also
retained MacKenzie Partners, Inc. at an estimated cost of $4,000 plus
reimbursement of expenses, to assist in the solicitation of proxies by
telephone and by mail.
THE FLUOROSCAN BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF FLUOROSCAN AND ITS STOCKHOLDERS AND HAS THEREFORE
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS THAT
STOCKHOLDERS OF FLUOROSCAN VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF FLUOROSCAN. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
23
<PAGE>
THE MERGER AND RELATED TRANSACTIONS
The following is a summary of the material features of the proposed Merger.
To the extent that it relates to the Merger Agreement, the following
description does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement, which is attached as Appendix A to this
Proxy Statement/Prospectus. All stockholders are urged to read the Merger
Agreement in its entirety.
GENERAL
The Merger Agreement provides for the merger of the newly-formed Fenway
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Hologic ("Merger Sub"), with and into FluoroScan. FluoroScan will be the
surviving corporation in the Merger and will become a wholly-owned subsidiary
of Hologic as a result of the Merger.
The current directors and officers of Hologic will continue to serve in
their current capacities following the Merger. The current officers of
FluoroScan are expected to continue to serve FluoroScan in their current
capacities following the Merger. Following the Merger, the Board of Directors
of FluoroScan is expected to consist of Larry S. Grossman and Arlen L.
Issette, the Chief Executive Officer and President of FluoroScan,
respectively, and three members appointed by Hologic. Messrs. Grossman and
Issette will also become Vice Presidents of Hologic, and Hologic has agreed to
elect Mr. Grossman to its Board of Directors upon the consummation of the
Merger. See "Hologic Management--Executive Officers and Directors." The
stockholders of FluoroScan will become stockholders of Hologic (as described
below) upon consummation of the Merger, and their rights as such will be
governed by the Hologic Certificate of Incorporation and By-laws and will
continue to be governed by Delaware Law. See "Comparison of Rights of
Stockholders of Hologic and FluoroScan" and "Description of Hologic Capital
Stock."
Conversion of Shares. Upon consummation of the Merger, each share of
FluoroScan Common Stock issued and outstanding immediately prior to the
Effective Time will be converted into the right to receive .31069 shares of
Hologic Common Stock, subject to adjustment as set forth below (the
"Conversion Ratio"). If the average closing price per share of the Hologic
Common Stock as quoted on the Nasdaq National Market for the ten trading days
ending two business days prior to the Effective Time (the "Average Market
Value") is greater than $50.29, the Conversion Ratio shall be adjusted to
equal $15.63 divided by the Average Market Value. If the Average Market Value
is less than $30.17, at Hologic's election the Conversion Ratio will be
adjusted to equal $9.37 divided by the Average Market Value. If the Average
Market Value is less than $30.17 and Hologic does not elect to adjust the
Conversion Ratio, the Board of Directors of FluoroScan may elect to terminate
the Merger Agreement and the Merger. No fractional shares of Hologic Common
Stock will be issued pursuant to the Merger. In lieu of any fractional share
of Hologic Common Stock that would otherwise be issued to FluoroScan
stockholders pursuant to the Merger Agreement, such FluoroScan stockholders
will receive cash in an amount equal to such fractional share multiplied by
the Average Market Value. Holders of FluoroScan Common Stock shall also have
the right to receive together with each share of Hologic Common Stock issued
in the Merger, an associated common stock purchase right ("Hologic Purchase
Right") pursuant to the Rights Agreement dated as of December 22, 1992, as
amended (the "Rights Agreement"), between Hologic and American Stock Transfer
& Trust Company, as Rights Agent. References herein to the Hologic Common
Stock issuable in the Merger shall be deemed to include the associated Hologic
Purchase Rights.
As of the Record Date, there were 4,622,894 shares of FluoroScan Common
Stock outstanding and 11,310,790 shares of Hologic Common Stock outstanding.
Assuming no adjustment to the Conversion Ratio, and without giving effect to
the issuance of any shares of FluoroScan Common Stock or Hologic Common Stock
after the Record Date, upon consummation of the Merger, the outstanding shares
of FluoroScan Common Stock would be converted into approximately 1,436,287
shares of Hologic Common Stock, representing approximately 11.3% of the
approximately 12,747,077 shares of Hologic Common Stock that would be
outstanding after the Merger, assuming no issuance of any other shares of
Hologic Common Stock or FluoroScan Common Stock after the Record Date.
24
<PAGE>
Conversion of Options. Each outstanding option to purchase FluoroScan Common
Stock (the "FluoroScan Plan Options") granted under the FluoroScan Option
Plans, and each option to purchase a FluoroScan unit ("FluoroScan Unit"), with
each FluoroScan Unit consisting of one share of FluoroScan Common Stock and a
warrant to purchase one share of FluoroScan Common Stock (the "FluoroScan Unit
Options," collectively with the FluoroScan Plan Options, the "FluoroScan
Options"), will be assumed by Hologic. Each FluoroScan Option so assumed shall
continue to have, and be subject to, the same terms and conditions set forth
in the FluoroScan Option prior to the Effective Time, except that (a) each
FluoroScan Plan Option shall be exercisable for that number of whole shares of
Hologic Common Stock equal to the number of shares of FluoroScan Common Stock
that were issuable upon exercise of the FluoroScan Plan Option immediately
prior to the Effective Time multiplied by the Conversion Ratio, and (b) each
FluoroScan Unit Option shall be exercisable for that number of whole Hologic
units, with each Hologic unit consisting of one share of Hologic Common Stock
and a warrant to purchase one share of Hologic Common Stock (a "Hologic
Unit"), equal to the number of FluoroScan Units that were issuable upon
exercise of the FluoroScan Unit Option immediately prior to the Effective Time
multiplied by the Conversion Ratio, and (c) the per share exercise price for
the Hologic Common Stock and the Hologic Units issuable upon exercise of the
FluoroScan Plan Options, the FluoroScan Unit Options and the warrants included
in the FluoroScan Units (the "FluoroScan Unit Warrants") will be equal to the
quotient determined by dividing the exercise price at which such option or
warrant was exercisable immediately prior to the Effective Time by the
Conversion Ratio.
As of the Record Date, there were (i) 957,800 shares of FluoroScan Common
Stock subject to outstanding FluoroScan Plan Options with exercise prices
ranging from $5.75 to $10.125 per share, (ii) 100,000 FluoroScan Units subject
to outstanding FluoroScan Unit Options with an exercise price of $10.50 per
FluoroScan Unit, and (iii) 100,000 shares of FluoroScan Common Stock subject
to the FluoroScan Unit Warrants, with an exercise price of $7.20 per share,
that are issuable upon exercise of FluoroScan Unit Options. Assuming no
adjustment to the Conversion Ratio and no exercise or grant of any FluoroScan
Options after the Record Date, upon consummation of the Merger (i) the
FluoroScan Plan Options would be converted into the right to purchase
approximately 297,600 shares of Hologic Common Stock at exercise prices
ranging from approximately $18.50 to $32.59 per share, (ii) the FluoroScan
Unit Options would be converted into the right to purchase approximately
31,069 Hologic Units, with an exercise price of approximately $33.80 per Unit,
and (iii) the FluoroScan Unit Warrants issuable upon exercise of the
FluoroScan Unit Options would be converted into the right to purchase
approximately 31,069 shares of Hologic Common Stock with an exercise price of
approximately $23.17 per share. Hologic has agreed to file and maintain the
effectiveness of a Registration Statement on Form S-8 under the Securities Act
with respect to all shares of Hologic Common Stock subject to FluoroScan Plan
Options to be assumed by Hologic that may be registered on Form S-8. In
addition, the holders of FluoroScan Unit Options will have demand and
piggyback registration rights with respect to the registration of the
underlying Hologic securities that will become subject to the FluoroScan Unit
Options upon their assumption by Hologic.
As of the Record Date, there were 1,355,766 shares of Hologic Common Stock
subject to outstanding options, with exercise prices ranging from $.05 to
$45.25 per share.
BACKGROUND OF THE MERGER
In recent years, management and the Board of Directors of Hologic have
discussed various business opportunities and strategic objectives, which
primarily focused on expanding Hologic's product lines. In the course of such
discussions, Hologic has considered possible alliances, combinations,
strategic investments and transactions with various participants in industries
compatible with Hologic's business.
In early May 1996, management representatives of Hologic approached
representatives of FluoroScan to seek information regarding FluoroScan's
business. At the meeting, the parties exchanged general information regarding
their respective businesses and discussed in general terms potential product
distribution or technical collaboration. There were no discussions regarding a
possible business combination at this meeting.
On June 4, 1996, Hologic senior management met to review their assessment of
FluoroScan and decided to invite FluoroScan management to visit Hologic for
further discussions.
25
<PAGE>
On June 18, 1996, Messrs. Grossman and Issette, the Chief Executive Officer
and President of FluoroScan, respectively, met with Messrs. Ellenbogen, Muir
and Weinstein, the Chairman and Chief Executive Officer, Vice President of
Finance, and Vice President of New Business Development of Hologic,
respectively, at Hologic's Waltham, Massachusetts facility. At this meeting,
Hologic first mentioned its interest in a possible business combination with
FluoroScan, and the senior management teams of Hologic and FluoroScan began to
explore the feasibility of such a combination.
On June 26, 1996, at a special meeting of the Hologic Board, Hologic's
management made an initial presentation on the considerations regarding, and
received questions and comments of the Hologic Board with respect to, a
possible business combination with FluoroScan. At this meeting, members of
Hologic management made a presentation consisting of descriptions of
FluoroScan's product lines, the results of preliminary due diligence through
the date of the meeting, and the possible risks and benefits of the proposed
combination. After consideration of management's presentation, the Hologic
Board concluded that management should pursue discussions with FluoroScan
regarding a possible strategic business combination.
On June 28, 1996, Hologic formally engaged Needham & Company, Inc. to serve
as its financial advisor with regard to the potential business combination of
Hologic and FluoroScan.
On July 1, 1996, Messrs. Grossman, Issette, Ellenbogen, Muir and Weinstein
met at an off-site location to discuss the possibility of a business
combination. At this time the parties discussed specific issues relating to
the combination including valuation, exchange ratio, representation of
FluoroScan management on the Hologic Board, and the continued employment of
FluoroScan executive officers. Upon the conclusion of this meeting, the
parties had reached a preliminary understanding on the general structure and
terms of a possible business combination.
On July 3, 1996, management and legal, accounting and financial advisors of
Hologic, and management and legal and accounting advisors of FluoroScan met in
Chicago, Illinois to discuss the primary issues and terms of the potential
business combination of the two companies and to fix a timetable for the
proposed combination.
From July 8 to July 10, 1996, management and legal, accounting and financial
advisors of Hologic and FluoroScan conducted their due diligence review of the
respective companies. During this time, representatives of the two companies
held a number of discussions regarding the terms of the proposed business
combination and the potential synergies and operational issues associated with
the proposed combination.
On July 11, 1996, FluoroScan formally engaged the services of Rodman as its
financial advisor with regard to the proposed business combination.
On July 16, 1996, at a special meeting of the Hologic Board called to review
the progress of the business combination negotiations and to consider the
approval of the Merger Agreement, a representative of Needham & Company, Inc.
made a presentation in which he reviewed certain strategic and financial
analyses of the proposed business combination. Outside legal counsel to
Hologic then reviewed with the Hologic Board its fiduciary duties in
considering the proposed combination and reviewed the principal terms of the
Merger Agreement and other documents related to the Merger. In addition,
management representatives of Hologic presented the Hologic Board with the
results of their due diligence review of FluoroScan and a summary of the
potential risks, synergies and benefits of the proposed combination. After
consideration of the various presentations, and discussion of the issues
raised in the course of such presentations, the Hologic Board unanimously
approved the Merger and the terms of the Merger Agreement and the other
related agreements, in substantially the form presented to the Hologic Board,
concluding that the Merger was fair to, and in the best interests of, Hologic.
On July 16, 1996, as part of a special meeting of the FluoroScan Board
called to review the progress of the business combination negotiations and to
consider the approval of the Merger Agreement, a representative of Rodman made
a presentation in which he reviewed certain strategic and financial analyses
of the proposed business combination, and presented that firm's tentative oral
opinion that the conversion ratio to be paid to FluoroScan's stockholders in
the Merger, as then proposed, was fair, from a financial point of view, to
such
26
<PAGE>
stockholders. Outside legal counsel to FluoroScan then reviewed with the Board
its fiduciary duties in considering the proposed combination and reviewed the
principal terms of the Merger Agreement and other documents related to the
Merger. In addition, management representatives of FluoroScan presented the
results of their due diligence review of Hologic and a summary of the
potential risks, synergies and benefits of the proposed combination. After
consideration of the various presentations, and discussion of the issues
raised in the course of such presentations, the FluoroScan Board unanimously
authorized the officers of FluoroScan to proceed with negotiations with
Hologic the next day, with the understanding that the FluoroScan Board would
reconvene prior to signing the Merger Agreement to further discuss the Merger
and further consider the opinion of Rodman as to whether the consideration to
be paid to FluoroScan stockholders in the Merger was fair, from a financial
point of view, to such stockholders.
Negotiations between the management of Hologic and FluoroScan continued
throughout July 17 and July 18, 1996 both as to the terms of the Merger
Agreement, including the Conversion Ratio, termination rights and termination
fees, and nonsolicitation provisions, and as to the terms of certain
agreements related to the Merger Agreement. Final agreement on these and other
issues was reached over the course of several discussions between Messrs.
Grossman, Issette, Ellenbogen, Muir and Weinstein over this two day period.
On July 18, 1996 at a special meeting of the Hologic Board called to review
the final terms of the Merger Agreement and the other related documents,
outside counsel to Hologic and a representative of Needham & Company, Inc.
reviewed with the Board the material changes to the terms of the Merger from
those presented at the July 16 meeting. Representatives of Hologic's
management also reviewed certain due diligence issues with the Board at this
meeting. The Board, after considering the revised terms of the Merger
Agreement, the other related documents, and the other issues discussed at the
meeting, again unanimously approved the Merger Agreement, the other related
agreements, and the Merger.
On July 18, 1996 at a special meeting of the FluoroScan Board called to
review the final terms of the Merger Agreement and the other related documents
and to consider the approval of the Merger Agreement, management and outside
counsel to FluoroScan reviewed with the Board the material changes to the
terms of the Merger from those presented at the July 16 meeting. A
representative of Rodman presented that firm's oral opinion, confirmed in
writing later that day, that the Conversion Ratio was fair from a financial
point of view to such stockholders. The Board, after considering the revised
terms of the Merger Agreement and the other related documents and the various
presentations, unanimously approved the Merger and the terms of the Merger
Agreement and the other related agreements, in substantially the form
presented to the Board, concluding that the consideration to be paid to
FluoroScan's stockholders in the Merger was fair to and in the best interests
of FluoroScan and its stockholders.
On the evening of July 18, 1996 Hologic, FluoroScan and Merger Sub executed
the Merger Agreement and certain related agreements.
HOLOGIC'S REASONS FOR THE MERGER
The Board of Directors of Hologic has determined that the Merger is in the
best interests of Hologic and its stockholders, and therefore unanimously
approved the Merger.
Hologic has been seeking to leverage its medical device development,
manufacturing and distribution expertise to expand, through acquisition or
strategic alliances, into complementary markets such as other diagnostic or
imaging markets. See "Information Relating to Hologic--Strategy." Hologic
believes that the business of FluoroScan meets this criteria for complementary
expansion and diversification. Among other things, the Hologic Board and
management considered the following factors: (i) FluoroScan products are based
on X-ray technology, an area of Hologic technical expertise; (ii) FluoroScan
products address a market, minimally invasive orthopedic surgery, that Hologic
believes offers attractive future growth potential; (iii) FluoroScan has
established an effective sales channel in the United States to address its
market which Hologic believes will be complimentary to Hologic's existing
domestic sales channels; (iv) Hologic believes that its well established
international sales and marketing structure could be used to accelerate the
expansion of the sale of FluoroScan's products in international markets; (v)
Hologic believes that its greater resources, including research and
27
<PAGE>
development personnel and working capital, should be able to further assist
FluoroScan in maintaining and enhancing its market position; and
(vi) FluoroScan's size was in the appropriate range for effective integration
with Hologic. Hologic's Board and management believed that a combination of
the foregoing factors, among others, should enhance stockholder value of
Hologic in the future, but Hologic's Board of Directors did not assign greater
relative weight to any one of these factors.
In approving the Merger Agreement, as part of the due diligence process, the
Hologic Board considered the information about FluoroScan available to it from
FluoroScan management and interviews with FluoroScan customers, an assessment
of FluoroScan's technology, resources, distribution network, and financial
condition, and information contained in FluoroScan's filings with the
Commission. In doing so, the Hologic Board not only considered the benefits
that could arise from the Merger, but also considered certain adverse effects
relating to the Merger, including the dilution to Hologic stockholders
resulting from the issuance of the shares of Hologic Common Stock pursuant to
the Merger, certain nonrecurring costs that would result from the Merger, and
the risks inherent in any merger, including the risk that the businesses of
Hologic and FluoroScan will not be able to be successfully integrated, and
other risks and uncertainties relating to the businesses of Hologic and
FluoroScan, including without limitation those described herein under "Risk
Factors."
FLUOROSCAN'S REASONS FOR THE MERGER
In its evaluation of the Merger, FluoroScan's Board of Directors considered
a number of factors prior to approving the Merger, including the following:
. The Merger would provide FluoroScan's stockholders with shares of
Hologic Common Stock in a tax-free exchange at a substantial premium
over the current market price for FluoroScan Common Stock.
. The Merger would enable FluoroScan's stockholders to own shares in
Hologic, which is a company with access to broader markets and
distribution channels than those of FluoroScan; and, at the same time,
would provide FluoroScan's stockholders the opportunity to continue to
participate in the long term growth and appreciation of both Hologic and
FluoroScan.
. The Merger would provide the opportunity to increase revenues by
combining the customer bases and complementary product offerings of both
companies.
. The Merger would provide the potential to expand the market presence of
FluoroScan worldwide through Hologic's sales force and distribution
networks.
. The Merger would provide FluoroScan's stockholders with greater
liquidity in their investment than they have had with their FluoroScan
shares because of the larger trading volume of Hologic's Common Stock.
. Information with respect to the financial condition and business of
Hologic, including among other things, Hologic's recent and historical
stock and earnings performance, the demonstrated ability of Hologic to
successfully implement its growth strategy, and the ability of Hologic
to access the capital markets and its stated commitment to expanding
FluoroScan's business.
. The terms of the Merger Agreement offer FluoroScan's stockholders
certain protection including an increase in the Conversion Ratio if the
price of Hologic Common Stock falls below a certain threshold level or,
in the event Hologic does not agree to increase the Conversion Ratio
should the price of Hologic Common Stock fall below such a level,
providing FluoroScan the right to terminate the Merger Agreement and the
Merger. See "The Merger and Related Transactions--Background of the
Merger" and "--Termination."
. The opinion of Rodman to FluoroScan's Board that, as of July 18, 1996,
the Conversion Ratio was fair, from a financial point of view, to
FluoroScan's stockholders. See "The Merger and Related Transactions--
Opinion of FluoroScan's Financial Advisor."
In the course of its deliberations, the Board of Directors of FluoroScan
reviewed a number of additional factors relevant to the Merger, including
principally (i) the capital structure of Hologic; (ii) premiums to market and
multiples paid in other merger and acquisition transactions of this nature;
(iii) an analysis of the relative
28
<PAGE>
value that FluoroScan might contribute to the future business and prospects of
the combined company; (iv) the compatibility of the management and businesses
of Hologic and FluoroScan; (v) the financial presentation by Rodman; and (vi)
reports from management and legal advisors on specific terms of the Merger
Agreement and the other agreements to be entered into in connection with the
Merger Agreement and other matters. For a discussion of many of the foregoing
factors, see "The Merger and Related Transactions--Opinion of FluoroScan
Financial Advisor" below.
The Board of Directors of FluoroScan also considered a number of potentially
negative factors in its deliberations concerning the Merger, including, among
other things: (i) the possibility of management disruption associated with the
Merger and the risk that, despite the efforts of the combined company, key
management personnel of FluoroScan might not continue with the combined
company; (ii) the risk that the benefits sought to be achieved by the Merger,
such as operating leverage and access to an established foreign distribution
network, will not be achieved; (iii) the fact that Hologic Common Stock was
trading at a relatively high multiple of earnings; (iv) the downward
adjustment to the Conversion Ratio if the Average Market Value exceeds $50.29;
(v) the loss of independence which would result from being a wholly-owned
subsidiary of Hologic; and (vi) the risks of the medical device industry in
general and Hologic in particular such as those described elsewhere in this
Proxy Statement/Prospectus. See "Risk Factors."
The foregoing discussion of the information and factors considered by
FluoroScan's Board of Directors is not intended to be exhaustive but is
believed to include all material factors considered by the FluoroScan Board.
In view of the wide variety of factors, both positive and negative, considered
by FluoroScan's Board of Directors, the Board did not find it practical to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered and individual directors may have given differing weights
to different factors.
After taking into consideration all of the factors set forth above, together
with an analysis of the presentations of management, Rodman, and legal
counsel, the Board of Directors of FluoroScan unanimously determined that the
Merger was fair to and in the best interests of FluoroScan and its
stockholders and that FluoroScan should proceed with the Merger at this time.
OPINION OF FLUOROSCAN'S FINANCIAL ADVISOR
At the special meeting of FluoroScan's Board of Directors on July 18, 1996,
Rodman rendered its written opinion that, as of such date, based upon and
subject to the various considerations set forth in the opinion, the Conversion
Ratio is fair to the holders of FluoroScan Common Stock. Rodman's opinion
addresses only the fairness of the Conversion Ratio from a financial point of
view to the holders of FluoroScan Common Stock and does not constitute a
recommendation to any stockholder of FluoroScan as to how such stockholder
should vote at the Special Meeting. The full text of the opinion of Rodman,
which sets forth the assumptions made, procedures followed, matters considered
and limits of its review, is attached hereto as Appendix B and is incorporated
herein by reference. Stockholders of FluoroScan Common Stock are urged to read
such opinion in its entirety.
In arriving at the opinion dated July 18, 1996, Rodman has, among other
things, with respect to FluoroScan: (i) reviewed, from a financial point of
view, the Merger Agreement and annexes thereto; (ii) reviewed the Annual
Reports to Stockholders and Annual Reports on Form 10-KSB of FluoroScan for
the years ended December 31, 1994 and 1995 and its interim reports on Form 10-
QSB and 8-K filed since July 11, 1994; (iii) reviewed certain publicly
available financial and operating data relating to the business and prospects
of FluoroScan, which historical information and data the management of
FluoroScan represented to Rodman as fairly presenting the financial condition
and operating results of FluoroScan as of the dates presented and, with
respect to the prospects of FluoroScan, as being reasonable evaluations of
FluoroScan's prospects; (iv) discussed certain financial information and the
business and prospects of FluoroScan with its senior management; (v) reviewed
the reported historical and recent market prices and trading volumes of
FluoroScan's Common Stock; (vi) compared the financial, operating and stock
price performance of FluoroScan with certain other publicly held companies
deemed comparable; (vii) reviewed the financial terms, to the extent publicly
available, of certain
29
<PAGE>
other acquisition transactions deemed comparable; and (viii) made such other
analyses and examinations as Rodman deemed necessary or appropriate. Rodman
has, among other things, with respect to Hologic: (i) studied the Annual
Reports to Stockholders and Annual Reports on Form 10-K of Hologic for the
years ended September 25, 1993, September 24, 1994 and September 30, 1995 and
its interim reports on Form 10-Q and 8-K filed since September 25, 1993; (ii)
reviewed certain publicly available financial and operating data relating to
the business and prospects of Hologic, which historical information and data
the management of Hologic represented to Rodman as fairly presenting the
financial condition and results of operations of Hologic as of the dates
presented and, with respect to the prospects of Hologic, as being reasonable
evaluations of Hologic's prospects; (iii) discussed certain financial
information and the business and prospects of Hologic with its senior
management; (iv) reviewed the reported historical and recent market prices and
trading volumes of Hologic's Common Stock; (v) compared the financial,
operating and stock price performance of Hologic with certain other publicly
held companies deemed comparable; (vi) reviewed the financial terms, to the
extent publicly available, of certain other acquisition transactions deemed
comparable; and (vii) made such other analyses and examinations as Rodman
deemed necessary or appropriate.
Rodman relied upon the accuracy and completeness of all information supplied
or otherwise made available to it by FluoroScan and Hologic or obtained by it
from other sources, and relied upon the representations of respective
management of FluoroScan and Hologic that they are unaware of any information
or facts that would make the information provided incomplete or misleading.
Rodman has not independently verified such information, undertaken an
independent appraisal of the assets or liabilities (contingent or otherwise)
of FluoroScan or Hologic, nor has it been furnished with any such appraisals.
With respect to the publicly available financial forecasts with regard to each
of FluoroScan and Hologic which Rodman reviewed, it relied on the
representations of respective management of FluoroScan and Hologic that such
available forecasts were reasonable and that: (i) as to the respective
forecasts, they were not aware of any facts that would make such information
incomplete, in any material respect, or misleading; and (ii) there had been no
material adverse developments in the business (financial or otherwise) or
prospects of FluoroScan or Hologic, since each company's most recent fiscal
year end. Rodman assumed, on the basis of advice from FluoroScan's independent
public accountants and counsel, that the Merger will be treated as a pooling
of interests in accordance with generally accepted accounting principles and
as a tax free reorganization for Federal income tax purposes. While Rodman
believes that its review, as described herein, is an adequate basis for the
opinion it has expressed, its opinion is necessarily based upon market,
economic and other conditions that existed and could be evaluated as of the
date of its opinion and any change in such conditions would require a re-
evaluation of its opinion.
In the performance of its financial advisory services, Rodman was not
authorized to solicit, and did not solicit, interest from any party with
respect to the acquisition of FluoroScan or any of its assets. No other
limitations were imposed upon Rodman by FluoroScan with respect to the
investigations to be made or procedures to be followed by it in rendering its
opinion.
Comparative Stock Price Performance. As part of its analysis, Rodman
reviewed the recent stock market performance of FluoroScan and Hologic and
compared such performance to a group of diagnostic device companies, including
Alliance Imaging, Fischer Imaging and OEC Medical Systems (the "Diagnostic
Device Companies") and a group of osteoporosis companies, including Lunar and
Norland Medical Systems. Rodman observed that over the period from January 6,
1995 through July 12, 1996, FluoroScan underperformed its peer group and the
S&P 500 and Hologic outperformed its peer group and the S&P 500.
Comparable Company Analysis. Rodman reviewed selected actual and estimated
financial, operating and stock market information for FluoroScan and compared
that information with corresponding information for comparable Diagnostic
Device Companies.
Rodman compared the total enterprise value (equity value at market, plus
total long-term debt, less cash and cash equivalents) of the Diagnostic Device
Companies to revenues, income before interest and taxes ("EBIT") and income
before interest, taxes, depreciation and amortization ("EBITDA") for the
latest 12
30
<PAGE>
months as reported by each company to the Commission, and the stock prices of
the Diagnostic Device Companies to the Diagnostic Device Companies' reported
earnings per share for the latest 12 months and projected earnings per share
for the 12 months ending December 31, 1996 and December 31, 1997 (where
available).
Such analysis indicated that for the Diagnostic Device Companies the range
of multiples were as follows: (i) for revenue, the range of multiples was 1.0
to 2.3 with a Diagnostic Device Company average of 1.5; (ii) for EBIT, the
range of multiples was 12.7 to 17.9 with a Diagnostic Device Company average
of 14.5; (iii) for EBITDA, the range of multiples was 5.5 to 11.7 with a
Diagnostic Device Company average of 9.0; and (iv) for market capitalization
(equity value at market) in terms of a multiple of net income, the range of
multiples was 12.8 to 20.2 with a Diagnostic Device Company average of 15.6.
By comparison, the multiples for FluoroScan were 1.6 times its revenues,
11.2 times its EBIT, 10.5 times its EBITDA and 18.0 times its market
capitalization/net income.
Comparable Transaction Analysis. Rodman reviewed certain publicly available
information relating to three completed merger and acquisition transactions
deemed comparable. The comparable transactions involved the combination of:
(i) Osteo Sciences with Metra Biosystems; (ii) Orthomet with Wright Medical
Technology; and (iii) BioSurface Technology with Genzyme. Rodman reviewed the
consideration paid in such transactions in terms of price paid for the common
stock ("Equity Value"), plus total debt, less cash and cash equivalents
("Total Consideration"), as a multiple of latest 12 months revenues, EBIT and
EBITDA, and Equity Value as a multiple of net income. The average of these
multiples was 2.0 times, 19.4 times, 12.1 times and 24.6 times, respectively.
Based on the conversion ratio for FluoroScan Common Stock under the Merger
Agreement, as of July 18, 1996, Total Consideration to holders of FluoroScan
Common Stock from the Merger represents multiples of 3.3 times latest 12 month
revenues of FluoroScan, 23.3 times latest 12 month EBIT of FluoroScan, 22.0
times latest 12 month EBITDA of FluoroScan and Equity Value to latest 12 month
net income of 44.6 times.
Discounted Cash Flow Analysis. Rodman conducted a discounted cash flow
analysis for the years ending December 31, 1996 to 2000 for the purpose of
valuing the outstanding shares of FluoroScan Common Stock. It computed the
terminal value of FluoroScan using projected EBITDA for the year ending
December 31, 2000 multiplied by a range of EBITDA multiples, which varied from
10.0 to 20.0 times. The terminal value of the business, as well as cash flows
for the preceding years, were then discounted five years at a range of
discount rates from 10.0% to 15.0%. This analysis indicated a range of values
per share of FluoroScan Common Stock of $7.17 to $10.65, compared to an actual
price on July 17, 1996 of $8.00.
Rodman's summary and further analysis showed that the "Comparable Company
Analysis" implied a valuation per share that ranges from $6.94 to $9.91 with
an average of $7.97, the "Comparable Transaction Analysis" implied a valuation
per share that ranged from $8.90 to $13.09 with an average of $10.97, the
"Discounted Cash Flow Analysis" implied a valuation per share that ranged from
$7.17 to $10.65 with an average of $8.79. The average of all valuation methods
implied a valuation per share of FluoroScan Common Stock of $9.25. As of the
date of Rodman's opinion the Conversion Ratio offered by Hologic for each
FluoroScan Common Share exceeded the minimum value for FluoroScan determined
under each valuation method and the average value for FluoroScan Common Stock
determined under all of these valuation methods.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analysis as a whole, could create an incomplete view of the
processes underlying Rodman's opinion. In arriving at its fairness
determination, Rodman considered the results of all such analyses. No company
or transaction used in the above analysis as a comparison is identical to
FluoroScan or Hologic or the proposed Merger, accordingly, an analysis of the
results of the foregoing is not purely quantitative. Rather, it involves
complex considerations and judgments concerning the differences in operating
and financial characteristics of the companies and other factors that could
affect the public trading values of the companies or company to which they are
compared.
31
<PAGE>
The analyses were prepared solely for purposes of enabling Rodman to provide
its opinion as to the fairness to holders of FluoroScan Common Stock of the
Conversion Ratio pursuant to the Merger Agreement and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results which may be significantly
more or less favorable than suggested by such analyses. The FluoroScan Board
retained Rodman to act as its financial advisor in connection with the
consideration by FluoroScan of the Merger, and to provide an opinion as to the
fairness, from a financial point of view, of the consideration to be received
by the holders of FluoroScan Common Stock in such transaction. As described
above, Rodman's opinion and presentation to the FluoroScan Board was one of
several factors taken into consideration by the FluoroScan Board in making its
determination to approve the Merger. The foregoing summary does not purport to
be a complete description of the analyses performed by Rodman and is qualified
by reference to the written opinion of Rodman set forth in Appendix B hereto.
SELECTION AND COMPENSATION OF FLUOROSCAN'S FINANCIAL ADVISOR
Rodman is a nationally recognized investment banking firm and, as part of
its investment banking activities, is regularly engaged in the valuations of
businesses and their securities in connection with mergers and acquisitions,
negotiated under writing secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes. Rodman has never been involved in any prior transaction with either
FluoroScan or Hologic. Rodman was retained to provide a fairness opinion in
its capacity as an independent financial advisor. Pursuant to a letter
agreement dated July 11, 1996 and amended July 17, 1996, FluoroScan agreed to
pay Rodman a fee of $200,000, payable in cash as follows: (i) $50,000 upon
execution of the engagement letter; (ii) $100,000 upon rendering a fairness
opinion; and (iii) $50,000 at the Effective Time. FluoroScan also agreed to
reimburse Rodman for expenses not to exceed $20,000, including fees and
expenses of its legal counsel incurred by it and to indemnify Rodman for
certain liabilities that may arise out of the rendering of its services or
opinions.
RECOMMENDATION OF FLUOROSCAN BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FLUOROSCAN HAS DETERMINED THAT THE MERGER IS FAIR
TO AND IN THE BEST INTERESTS OF FLUOROSCAN AND ITS STOCKHOLDERS AND HAS
UNANIMOUSLY RECOMMENDED A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the FluoroScan Board of Directors with
respect to the Merger, stockholders of FluoroScan should be aware that certain
members of FluoroScan's management and the FluoroScan Board of Directors have
interests in the Merger that are in addition to the interests of the
stockholders of FluoroScan generally. The FluoroScan Board of Directors was
aware of these interests and considered them, among other matters, in
approving the Merger Agreement and the Merger.
Stock Options. Pursuant to the Merger Agreement, at the Effective Time, each
FluoroScan Plan Option then outstanding under the FluoroScan Option Plans,
whether vested or unvested, shall be assumed by Hologic as described under
"The Merger and Related Transactions--General" above. In addition, the
outstanding Director Options to purchase, in the aggregate, 72,000 shares of
FluoroScan Common Stock will entitle the holders to receive cash payments
equal to the fair market value of such shares minus their exercise price
following the Merger. Assuming a fair market value of $12.50 per share of
FluoroScan Common Stock, these directors would receive an aggregate of
approximately $400,000 if they exercised their right to receive cash payments
for all of their outstanding options. Each of the holders of Director Options
has agreed to waive his right to such payment and have his Director Options
assumed by Hologic in the event that such cash payments would cause the Merger
not to qualify as a pooling of interest for accounting and financial reporting
purposes. As of the Record Date Larry S. Grossman, Arlen L. Issette and all
current officers as a group held options to
32
<PAGE>
purchase 300,000, 300,000 and 735,000 shares, respectively, of FluoroScan
Common Stock under the FluoroScan Option Plans at exercise prices ranging from
$6.19 to $7.15 per share, and the independent FluoroScan Directors held
options to purchase 72,000 shares of FluoroScan Common Stock at exercise
prices ranging from $6.19 to $9.63 per share. In addition, one director holds
FluoroScan Unit Options to purchase FluoroScan Units at an exercise price of
$10.50 per FluoroScan Unit.
Employment Arrangements with Certain FluoroScan Officers. Simultaneously
with the execution of the Merger Agreement, each of Larry S. Grossman and
Arlen L. Issette, the Chief Executive Officer and President of FluoroScan,
respectively, entered into an Amended and Restated Employment Agreement
("Employment Agreement") with FluoroScan and Hologic that will become
effective and supersede their current employment agreements (the "Current
Employment Agreements")with FluoroScan upon consummation of the Merger. The
Employment Agreements provide for the continuation of Messrs. Grossman's and
Issette's employment with FluoroScan on terms substantially equivalent to
their respective Current Employment Agreements.
The Employment Agreements provide that Messrs. Grossman and Issette will
continue as Chief Executive Officer and President of FluoroScan, respectively,
continue as directors of FluoroScan and become Vice Presidents of Hologic, and
that Mr. Grossman will become a director of Hologic upon the consummation of
the Merger. The Employment Agreements continue through the term of the Current
Employment Agreements, February 15, 1999. During the term of the Employment
Agreements, Messrs. Grossman and Issette will receive their current salary of
$220,000 per year, subject to a 5% increase in each year commencing on
February 15, 1997, will be entitled to a discretionary bonus as determined by
the Board of Directors of Hologic or FluoroScan, and participate in Hologic's
fringe benefit plans on the same terms as other Hologic executive officers.
The Employment Agreements also provide for the continuation of $2,000,000 of
split dollar life insurance policies, with a cost of $28,000 per year, for the
benefit of members of Messrs. Grossman's and Issette's respective families and
the right of each of Messrs. Grossman and Issette to buy-out the policies for
their cash value upon termination of his Employment Agreement.
The Employment Agreements contain other terms similar to those contained in
the Current Employment Agreements, including (i) the right of Hologic and
FluoroScan to terminate Messrs. Grossman or Issette for cause, (ii) the right
of Messrs. Grossman or Issette to terminate his services, while continuing to
be paid under his Employment Agreement for the remainder of the term, if he is
required to relocate outside of the Chicago Metropolitan Area, upon certain
changes of his responsibilities, or upon certain changes of control of
FluoroScan or Hologic, (iii) proprietary information and confidentiality
agreements, and (iv) the agreement of each of Messrs. Grossman and Issette not
to compete with Hologic or FluoroScan for a period of two years following his
termination of employment (including any period in which he is paid a salary,
whether or not employed).
Continuing Rights to Indemnification; Limitation of Liability; Directors'
and Officers' Liability Insurance. The Merger Agreement provides that for a
period of five years after the Effective Time, Hologic will cause FluoroScan
to maintain in effect the current policies of directors' and officers'
liability insurance maintained by FluoroScan (or policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that FluoroScan will
not be obligated to make annual premium payments for such insurance to the
extent that such premiums exceed an amount equal to 150% of the annual
premiums paid as of the date of the Merger Agreement by FluoroScan for such
insurance and, if such premiums exceed such amount, FluoroScan will only be
required to purchase insurance policies in amounts and with coverage as
reasonably can be purchased for such amount.
The Merger Agreement further provides that Hologic will assume joint
liability with FluoroScan for its indemnification obligations to FluoroScan's
directors, in all capacities in which such directors served FluoroScan or its
subsidiaries while directors prior to the Effective Time, as set forth in
FluoroScan's Amended and Restated Certificate of Incorporation, provided that
Hologic's maximum obligation under this agreement will be limited to the
working capital of FluoroScan as of the Effective Time less any amounts
indemnified by FluoroScan
33
<PAGE>
(excluding amounts paid by insurance of FluoroScan). FluoroScan's Amended and
Restated Certificate of Incorporation provides that FluoroScan's directors
will be indemnified to the full extent permitted by Delaware Law.
The Merger Agreement further provides that Hologic will assume joint
liability with FluoroScan for any indemnification obligation it may have to
directors of FluoroScan who continue to serve as directors of FluoroScan after
the Effective Time pursuant to any indemnification agreements entered into by
FluoroScan with such directors, with respect to acts or events (in any
capacity) while serving as a director of FluoroScan on or after the Effective
Time. Pursuant to their Employment Agreements, Messrs. Issette and Grossman
will continue to serve as directors of FluoroScan following the consummation
of the Merger and thereby continue to be entitled to such indemnification. In
addition, under Mr. Grossman's Employment Agreement, Hologic has also agreed
to enter into an indemnification agreement with Mr. Grossman on the same terms
as Hologic's indemnification agreements with its current directors.
MATERIAL CONTACTS BETWEEN HOLOGIC AND FLUOROSCAN
Other than the discussions in May, June and July 1996 between Hologic and
FluoroScan concerning the feasibility of a strategic relationship between
Hologic and FluoroScan and the negotiations relating to, and entry into, the
Merger Agreement discussed in "The Merger and Related Transactions--Background
of the Merger," the Stockholder Option Agreement between Hologic and certain
Stockholders of FluoroScan discussed under "The Merger and Related
Transactions--Option Agreement with Certain Stockholders" and the Stockholder
Agreements between Hologic and certain stockholders of FluoroScan discussed
under "The Special Meeting--Intentions and Agreements to Vote," Hologic and
FluoroScan do not know of any past, present or proposed material contracts,
arrangements, understandings, relationships, negotiations or transactions
between FluoroScan or its affiliates and Hologic or its affiliates.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Hologic and FluoroScan have made certain representations and warranties to
each other relating to, among other things, organization, capitalization and
share ownership, authorization for, and absence of conflicts resulting from,
the Merger, compliance with laws, the accuracy and completeness of financial
statements and certain filings with the Commission, financial condition,
employment benefit plans, legal actions and proceedings and, in the case of
FluoroScan, intellectual property, tax matters, contracts, insurance, product
warranty, inventories, environmental matters, properties, employees,
customers, suppliers, and financial condition.
Hologic and FluoroScan have agreed: (i) to use their respective commercially
reasonable efforts to consummate the transactions contemplated by the Merger
Agreement; (ii) to obtain all waivers, permits, consents, approvals or other
authorizations from third parties and governmental entities necessary for the
consummation of the transactions contemplated by the Merger Agreement; (iii)
to jointly prepare and file with the Commission under the Exchange Act proxy
materials for the purpose of soliciting proxies from FluoroScan stockholders
to vote in favor of the approval of the Merger Agreement at the Special
Meeting; (iv) to promptly notify the other party in writing of the occurrence
of any event or development that would (a) render any statement,
representation or warranty of either party in the Merger Agreement inaccurate
or incomplete in any material respect or (b) constitute or result in a breach
by either party or failure by either party to comply with, any agreement or
covenant in the Merger Agreement applicable to such party; (v) to promptly
advise and cooperate with the other party prior to a party's issuance of any
press release or other information to the press or to any third party with
respect to the Merger Agreement or the transactions contemplated thereby; and
(vi) to keep confidential and not use in any manner any information or
documents obtained from the other party, except as provided in the Merger
Agreement.
FluoroScan has also agreed: (i) to permit representatives of Hologic to have
full access to all premises, properties, financial and accounting records,
contracts, other records, documents and personnel, of or pertaining to
FluoroScan; (ii) to obtain from its affiliates the agreements referred to
under "The Merger and Related
34
<PAGE>
Transactions--Accounting Treatment;" and (iii) to encourage the employees of
FluoroScan to remain in the employ of FluoroScan following the Effective Time
.
CONDUCT OF BUSINESS OF FLUOROSCAN PENDING THE MERGER
FluoroScan has agreed in the Merger Agreement that prior to the consummation
of the Merger, it will, among other things, conduct its operations in the
ordinary course of business and in compliance with all applicable laws and
regulations and, to the extent consistent therewith, use all reasonable
efforts to preserve intact its current business organization, keep its
physical assets in good working condition, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business shall not be impaired in any material respect.
FluoroScan has also agreed that prior to the consummation of the Merger it
will not, without the prior written consent of Hologic, take certain actions
including without limitation: (i) the issuance, sale or delivery of
securities, or the commitment or authorization therefor; (ii) the split,
recombination or reclassification of shares of capital stock or the payment of
any dividend; (iii) the creation or assumption of debt (except in the ordinary
course of business) or the making of any loans; (iv) the adoption or amendment
of any employee benefit plan or employment or severance arrangement; (v) the
acquisition, sale or transfer of any equity interests in any entity (except in
the ordinary course of business); (vi) any amendment of FluoroScan charter
documents; (vii) any changes in any material respect in accounting methods;
(viii) the discharge or satisfaction of security interests; (ix) the mortgage
or pledge of any property or assets; (x) the transfer of any intellectual
property (except in the ordinary course of business); (xi) the taking of any
action that would result in a violation or default under any material
contract; (xii) the making or commitment to make any capital expenditure in
excess of specified dollar amounts; (xiii) the taking of any action that would
result in a breach of any representation or warranty in the Merger Agreement
or would result in any of the conditions to the Merger not being satisfied; or
(xiv) the taking of any action that would jeopardize the treatment of the
Merger as a "pooling of interests."
NO SOLICITATION
The Merger Agreement provides that subject to certain exceptions described
below, FluoroScan will not, and will not permit its officers, directors,
employees, representatives and agents, directly or indirectly: (i) to
encourage, solicit, initiate, engage or participate in discussions or
negotiations with any person or entity (other than Hologic) concerning any
merger, consolidation, sale of material assets, tender offer,
recapitalization, accumulation of shares of FluoroScan Common Stock, proxy
solicitation or other business combination involving FluoroScan or any
subsidiary or division of FluoroScan (an "Acquisition Transaction"); or (ii)
to provide any information concerning the business, properties or assets of
FluoroScan to any person or entity (other than Hologic). Nonetheless, if
FluoroScan receives an unsolicited written proposal for, or an unsolicited
written indication of a serious interest in entering into, an Acquisition
Transaction from a bona fide, financially capable third party that contains no
financing contingency, (i) FluoroScan in its discretion may furnish to and
communicate with such third party public information requested by such party,
and (ii) FluoroScan may enter into discussions and negotiations with such
third party and may, at the request of such third party, furnish such third
party with non-public information concerning FluoroScan, provided (in the case
of this clause (ii)) that (a) FluoroScan gives Hologic written notice thereof
at least five business days prior to furnishing any such information, (b)
FluoroScan's Board of Directors, after consultation with and based upon the
advice of an independent financial advisor (who may be FluoroScan's regularly
engaged financial advisor), determines in good faith that such third party is
financially capable, without any financing contingency, of consummating an
Acquisition Transaction that would yield a higher value to FluoroScan
stockholders than will the Merger, (c) FluoroScan's Board of Directors, after
weighing such advice, determines that taking such action is more likely than
not to lead to an Acquisition Transaction with such third party that would
yield a higher value to FluoroScan stockholders than will the Merger, and (d)
the Company's Board of Directors shall have been advised in writing by
independent legal counsel (who may be the Company's regular legal counsel),
that any failure to provide such non-public information to such party would
likely constitute a breach of the fiduciary responsibilities of the Board of
Directors to FluoroScan's stockholders.
35
<PAGE>
FluoroScan has agreed immediately to advise Hologic in writing of the
receipt of any inquiries or proposals relating to an Acquisition Transaction
and any actions taken pursuant to the preceding paragraph.
CONDITIONS TO THE MERGER
The obligations of each party to effect the Merger are subject to the
following conditions: (i) the Merger Agreement shall have been approved by
FluoroScan's stockholders; (ii) the Registration Statement of which this Proxy
Statement/Prospectus is a part shall have become effective in accordance with
the provisions of the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
Commission and remain in effect; (iii) the shares of Hologic Common Stock to
be issued in the Merger shall have been authorized for listing on the Nasdaq
National Market; and (iv) the pre-transaction filing and waiting period
requirements applicable to the Merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or
shall have been terminated.
The obligation of Hologic to consummate the Merger is subject to the
satisfaction of certain conditions, including the following: (i) FluoroScan
shall have obtained all of the waivers, permits, consents, approvals and other
authorizations, and effected all of the registrations, filings and notices
required pursuant to the Merger Agreement that are reasonably deemed necessary
by Hologic to provide for the continuation of all material agreements and to
consummate the Merger; (ii) the representations and warranties of FluoroScan
contained in the Merger Agreement shall continue to be true and correct in all
material respects as of the Effective Time; (iii) FluoroScan shall have
performed or complied in all material respects with its agreements and
covenants required to be performed or complied with under the Merger
Agreement; (iv) FluoroScan shall have delivered to Hologic all necessary
certificates and opinions required pursuant to the Merger Agreement; (v)
Hologic shall have received an opinion of Katten Muchin & Zavis, counsel to
FluoroScan, with respect to the due authorization, execution, delivery and
enforceability of the Merger Agreement and certain other matters; (vi) no
action, suit or proceeding shall be pending or threatened before any
governmental entity or authority wherein an unfavorable judgment, order,
decree, stipulation or injunction would (a) prevent consummation of any of the
transactions contemplated by the Merger Agreement, (b) cause any of the
transactions contemplated by the Merger Agreement to be rescinded following
consummation or (c) affect adversely the right of Hologic to own, operate or
control any of the assets and operations of FluoroScan following the Merger,
and no such judgment, order, decree, stipulation or injunction shall be in
effect; (vii) Hologic shall have received a letter from BDO Seidman, LLP, the
independent accountants of FluoroScan, with respect to the absence of certain
attributes of FluoroScan which would preclude the Merger from being treated as
a pooling of interests for accounting purposes; (viii) Hologic shall have
received a letter from Arthur Andersen LLP, its independent accountants, to
the effect that Hologic may treat the Merger as a pooling of interests for
accounting purposes; (ix) Hologic shall have received written agreements from
all FluoroScan affiliates that they will not transfer the shares of Hologic
Common Stock held by them or obtained by them in connection with the Merger,
otherwise than in accordance with the terms of such agreements; (x) Hologic
shall have received an opinion from Brown, Rudnick, Freed & Gesmer, counsel to
Hologic, (or, in the absence of such an opinion from said firm, from Katten
Muchin & Zavis, in either case in a form reasonably satisfactory to the
Hologic), based upon certain factual representations of FluoroScan and
Hologic, to the effect that the Merger will constitute a reorganization for
federal income tax purposes within the meaning of Section 368(a) of the Code;
(xi) there shall not have been any material adverse change in the assets,
business, financial condition or results of operations of FluoroScan, nor
shall there have occurred any event or development which could reasonably be
likely to result in such material adverse change; (xii) Hologic shall have
received from Cooper & Dunham, its patent counsel, an opinion with respect to
matters relating to the patents and technology of FluoroScan; and (xiii) all
actions to be taken by FluoroScan in connection with the consummation of the
transactions contemplated by the Merger Agreement and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Hologic.
The obligation of FluoroScan to consummate the Merger is subject to the
satisfaction of the following additional conditions: (i) the representations
and warranties of Hologic and Merger Sub contained in the Merger Agreement
shall continue to be true and correct in all material respects as of the
Effective Time; (ii) Hologic and Merger Sub shall have performed or complied
with in all material respects the required agreements and
36
<PAGE>
covenants required to be performed or complied with by them under the Merger
Agreement; (iii) Hologic and Merger Sub shall have delivered to FluoroScan all
necessary certificates and opinions required pursuant to the Merger Agreement;
(iv) Hologic and Merger Sub shall have obtained all of the waivers, permits,
consents, approvals and other authorizations, and effected all of the
registrations, filings and notices required pursuant to the Merger Agreement
that are reasonably deemed necessary by FluoroScan to consummate the Merger;
(v) no writ, order, decree or injunction of a court of competent jurisdiction
or governmental entity shall have been entered against Hologic, Merger Sub or
FluoroScan which prohibits the consummation of the Merger; (vi) no action,
suit or proceeding shall be pending or threatened before any governmental
entity or authority wherein an unfavorable judgment, order, decree,
stipulation or injunction would (a) prevent consummation of any of the
transactions contemplated by the Merger Agreement, (b) cause any of the
transactions contemplated by the Merger Agreement to be rescinded following
consummation or (c) materially and adversely affect or otherwise encumber the
title of the shares of Hologic Common Stock to be issued to the stockholders
of FluoroScan upon consummation of the Merger; provided, however, that
FluoroScan shall automatically be deemed to have waived this requirement if
Hologic agrees to provide FluoroScan, its officers, directors, controlling
persons and stockholders, with indemnification with respect to such action,
suit or proceeding in form and substance reasonably satisfactory to
FluoroScan; (vii) FluoroScan shall have received an opinion of counsel of
Brown, Rudnick, Freed & Gesmer, counsel to Hologic, with respect to the due
authorization, execution, delivery and enforceability of the Merger Agreement,
the validity of the shares of Hologic Common Stock to be issued in the Merger
and certain other matters; (viii) FluoroScan shall have received a written
opinion from Katten Muchin & Zavis, Counsel to FluoroScan (or in the absence
of such an opinion from said firm, from Brown, Rudnick, Freed & Gesmer, in
either case in a form reasonably acceptable to FluoroScan), based upon certain
factual representations of FluoroScan and Hologic, to the effect that the
Merger will constitute a reorganization for federal income tax purposes within
the meaning of Section 368(a) of the Code; (ix) there shall not have been any
material adverse change in the assets, business, financial condition or
results of operations of FluoroScan, nor shall there have occurred any event
or development which could reasonably be likely to result in such material
adverse change; (x) Larry S. Grossman and Arlen L. Issette, the Chief
Executive Officer and President of FluoroScan, respectively, shall have been
appointed Vice Presidents of Hologic effective as of the Effective Time; and
(xi) all actions to be taken by Hologic and Merger Sub in connection with the
consummation of the transactions contemplated by the Merger Agreement and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated thereby shall be reasonably satisfactory in form and
substance to FluoroScan.
EFFECTIVE TIME
The Effective Time of the Merger will occur upon the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware or at such
later time as is specified on such certificate. The filing of the Certificate
of Merger will occur as soon as practicable after the satisfaction of the
conditions set forth in the Merger Agreement, which is currently expected to
be on or about August 29, 1996. The Merger Agreement may be terminated by
either party if the Merger has not been consummated on or before November 30,
1996 and under certain other conditions. See "The Merger and Related
Transactions--Conditions to the Merger," "--Termination" and "--Termination
Fees and Expenses."
TERMINATION
The party or parties identified below may terminate the Merger Agreement
prior to the Effective Time (whether before or after stockholder approval is
obtained) with the prior authorization of its or their respective Boards of
Directors, as the case may be, as follows:
(i) Hologic and FluoroScan may terminate the Merger Agreement by mutual
consent;
(ii) either Hologic or FluoroScan may terminate the Merger Agreement if
(a) without fault of such terminating party, the Merger shall not have been
consummated on or before November 30, 1996, (b) any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining
order), decree or ruling or taken any other action
37
<PAGE>
restraining, enjoining or otherwise prohibiting the Merger, and such order,
decree ruling or other action shall have become final and nonappealable, or
(c) FluoroScan stockholders fail to approve the Merger Agreement and the
Merger at the Special Meeting;
(iii) Hologic may terminate the Merger Agreement if (a) FluoroScan shall
have failed to comply in any material respect with any of the covenants or
agreements contained in the Merger Agreement to be complied with or
performed by FluoroScan at or prior to such date of termination; provided,
however, that if such failure or failures are capable of being cured prior
to the Effective Time, such failure, or failures shall not have been cured
within 15 days of delivery to FluoroScan of written notice of such failure
or failures, (b) there exists a breach or breaches of any representation or
warranty of FluoroScan contained in the Merger Agreement in any material
respect such that a Hologic closing condition would not be satisfied;
provided, however, that if such failure, breach or breaches are capable of
being cured prior to the Effective Time, such failure, breach or breaches
shall not have been cured within 15 days of delivery to FluoroScan of
written notice of such failure, breach or breaches, or (c) FluoroScan shall
furnish or disclose non-public information to a third party with respect to
any Acquisition Transaction, or shall have resolved to do the foregoing and
publicly disclose such resolution; and
(iv) FluoroScan may terminate the Merger Agreement if (a) Hologic or
Merger Sub shall have failed to comply in any material respect with any of
the covenants or agreements contained in the Merger Agreement to be
complied with or performed by Hologic or Merger Sub at or prior to such
date of termination; provided, however, that if such failure or failures
are capable of being cured prior to the Effective Time, such failure or
failures shall not have been cured within 15 days of delivery to Hologic of
written notice of such failure or failures, (b) there exists a breach or
breaches of any representation or warranty of Hologic or Merger Sub
contained in the Merger Agreement in any material respect such that a
FluoroScan closing condition would not be satisfied; provided, however,
that if such failure, breach or breaches are capable of being cured prior
to the Effective Time, such failure, breach or breaches shall not be cured
within 15 days of delivery to Hologic of written notice of such failure,
breach or breaches; or (c) if the Average Market Value of the Hologic
Common Stock is less than $30.17 and Hologic does not elect to adjust the
conversion ratio to equal $9.37 divided by the Average Market Price within
15 days after the date of the Special Meeting.
TERMINATION FEE AND EXPENSES
In the event of a termination of the Merger Agreement (i) because FluoroScan
stockholders fail to approve the Merger Agreement and the Merger at the
Special Meeting or (ii) by Hologic as a result of a breach by FluoroScan of
the Merger Agreement or FluoroScan furnishing or disclosing non-public
information to a third party with respect to any potential Acquisition
Transaction, or resolving to do the foregoing and publicly disclosing such
resolution, then FluoroScan shall pay Hologic up to $1.5 million for all
documented fees and expenses incurred by Hologic (including the reasonable
fees and expenses of counsel, accountants, consultants and advisors) in
connection with the Merger Agreement and the transactions contemplated thereby
(the "Hologic Documented Expenses").
In the event of a termination of the Merger Agreement (i) because FluoroScan
stockholders fail to approve the Merger Agreement and the Merger at the
Special Meeting, where the Board of Directors of FluoroScan withdraws its
recommendation of the Merger or modifies such recommendation in a manner
adverse to Hologic, or (ii) as a result of FluoroScan disclosing non-public
information to a third party with respect to any potential Acquisition
Transaction, or resolving to do the foregoing and publicly disclosing such
resolution, FluoroScan shall promptly pay Hologic an additional fee of $2.4
million (the "Termination Fee"). To the extent that either Hologic Documented
Expenses or the Termination Fee have not already become payable and been paid,
and, if prior to any termination of the Merger Agreement (other than a
termination of the Merger Agreement by FluoroScan as a result of any breaches
of the Merger Agreement by Hologic or Hologic's election not to adjust the
Conversion Ratio if the Average Market Value is below $30.17), any person
shall have made a bona fide proposal concerning a Business Combination
Transaction (as defined below) and prior to or within twelve months after the
termination of the Merger Agreement, FluoroScan or any of its subsidiaries, or
any affiliate of
38
<PAGE>
FluoroScan, enters into a definitive agreement with a third party with respect
to a Business Combination Transaction or a Business Combination Transaction is
effected, then FluoroScan, prior to entering into any such definitive
agreement or effecting any such Business Combination Transaction, shall
promptly pay Hologic the Hologic Documented Expenses and the Termination Fee.
For purposes of the foregoing, the term "Business Combination Transaction"
means any of the following involving FluoroScan or any of its subsidiaries,
that is material to the business, results of operation, prospects or financial
condition of FluoroScan: (i) any merger, consolidation, share exchange,
business combination or other similar transaction (other than the Merger);
(ii) any sale, lease, exchange, transfer or other disposition of 50% or more
of the assets of FluoroScan and its subsidiaries in a single transaction or
series of transactions; or (iii) the acquisition by a person or entity, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of beneficial ownership of 33 1/3% or
more of the shares of FluoroScan Common Stock, whether by tender offer,
exchange offer or otherwise. The merger cancellation fees described above
could have the effect of discouraging a third party from pursuing a takeover
or other acquisition transaction involving FluoroScan because the cost of such
takeover or other acquisition transaction, if successful, would be increased
by the amount of such fees.
In the event of a termination of the Merger Agreement by FluoroScan as a
result of a breach by Hologic or Merger Sub, Hologic shall pay to FluoroScan
up to $1.5 million for all documented fees and expenses incurred by FluoroScan
(including the reasonable fees and expenses of counsel, accountants,
consultants and advisors) in connection with the Merger Agreement and the
transactions contemplated thereby.
OPTION AGREEMENT WITH CERTAIN STOCKHOLDERS
On July 18, 1996, Hologic entered into a Stockholder Option Agreement with
Messrs. Grossman and Issette (the "Stockholder Option Agreement"). Under the
Stockholder Option Agreement, Messrs. Grossman and Issette have granted
Hologic an option in certain circumstances where the Termination Fee is
payable, to purchase the shares of FluoroScan Common Stock held by them at an
exercise price equal to the Conversion Ratio. The number of shares of
FluoroScan Common Stock covered by the Stockholder Option Agreements is
1,467,152 which constitutes approximately 31.7% of the number of outstanding
shares of FluoroScan Common Stock on the Record Date.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion, at the Conversion Ratio, of FluoroScan Common Stock into
shares of Hologic Common Stock will occur automatically at the Effective Time.
As soon as practicable after the Effective Time, a transmittal letter will
be mailed by American Stock Transfer & Trust Company (the "Exchange Agent") to
each stockholder of FluoroScan informing such stockholder of the procedures to
follow in forwarding his or her certificates for FluoroScan Common Stock to
the Exchange Agent. Upon receipt of such certificates, the Exchange Agent will
deliver whole shares of Hologic Common Stock to such stockholder and cash in
lieu of fractional shares pursuant to the terms of the Merger Agreement and in
accordance with the transmittal letter, together with any dividends or other
distributions to which such stockholder is entitled, without interest. For a
description of how the amount of cash in lieu of fractional shares will be
determined, see "The Merger Agreement and Related Transactions--General."
If any issuance of shares of Hologic Common Stock in exchange for shares of
FluoroScan Common Stock is to be made to a person other than the holder of
FluoroScan Common Stock in whose name the certificate is registered at the
Effective Time, it will be a condition of such exchange that the certificate
so surrendered be properly endorsed or otherwise in proper form for transfer
and that the holder of FluoroScan Common Stock requesting such issuance either
pay any transfer or other tax required or establish to the satisfaction of
Hologic that such tax has been paid or is not payable.
After the Effective Time, there will be no further transfers of FluoroScan
Common Stock on the stock transfer books of FluoroScan. If a certificate
representing FluoroScan Common Stock is presented for transfer, it will be
39
<PAGE>
canceled and a certificate representing the appropriate number of whole shares
of Hologic Common Stock and cash in lieu of fractional shares and any
dividends and distributions will be issued in exchange therefor, without
interest.
After the Effective Time and until surrendered, shares of FluoroScan Common
Stock will be deemed for all corporate purposes, other than the payment of
dividends and distributions, to evidence ownership of the number of whole
shares of Hologic Common Stock into which such shares of FluoroScan Common
Stock were converted at the Effective Time. No dividends or other
distributions, if any, payable to holders of Hologic Common Stock will be paid
to the holders of any certificates for shares of FluoroScan Common Stock until
such certificates are surrendered. Upon surrender of such certificates, all
such declared dividends and distributions payable after the Effective Time
will be paid to the holder of record of the whole shares of Hologic Common
Stock represented by the certificate issued in exchange therefor, without
interest.
HOLDERS OF FLUOROSCAN COMMON STOCK SHOULD NOT FORWARD STOCK CERTIFICATES TO
THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. HOLDERS OF
FLUOROSCAN COMMON STOCK SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY CARD.
CERTAIN FEDERAL INCOME TAX MATTERS
Set forth below is a discussion of certain federal income tax consequences
of the Merger to stockholders of FluoroScan who hold shares as a capital
asset. The discussion does not address the tax consequences that may be
relevant to a particular stockholder subject to special treatment under
certain federal income tax laws, such as dealers in securities, banks,
insurance companies, tax-exempt organizations, non-United States persons,
stockholders who acquired their shares of FluoroScan Common Stock pursuant to
the exercise of options or otherwise as compensation, and persons holding
(directly or indirectly) five percent or more of the outstanding shares of
Hologic Common Stock following the Merger. In addition, the following
discussion does not address the tax consequences of the Merger arising under
the laws of any state, local or foreign jurisdiction or the tax consequences
of transactions effectuated prior or subsequent to or concurrently with the
Merger (whether or not such transactions are in connection with the Merger),
including, without limitation, transactions in which FluoroScan Common Stock
is acquired or shares of Hologic Common Stock are disposed of. Moreover, the
tax consequences to holders of options or warrants are not discussed. The
discussion is based upon the Code, treasury regulations thereunder and
administrative rulings and court decisions as of the date hereof. All of the
foregoing are subject to change, possibly with retroactive effect, and any
such change could affect the continuing validity of this discussion.
FluoroScan does not intend to request a ruling from the Internal Revenue
Service ("IRS") with respect to the Merger, and opinions of counsel are not
binding on the IRS or the courts.
FLUOROSCAN'S STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
MERGER TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.
This summary is based upon the advice of Brown, Rudnick, Freed and Gesmer,
counsel to Hologic, and Katten Muchin & Zavis, counsel to FluoroScan, one or
both of whom will be delivering opinions to Hologic and FluoroScan that,
subject to the limitations and qualifications referred to therein, the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code (a "Reorganization"). Qualification of the Merger as a Reorganization
will generally result in the following federal income tax consequences:
(a) No gain or loss will be recognized by FluoroScan, Hologic or Merger
Sub solely as a result of the consummation of the Merger;
(b) No gain, loss or income will be recognized by holders of FluoroScan
Common Stock upon the receipt of shares of Hologic Common Stock in exchange
therefor (except with respect to any cash received by holders of FluoroScan
Common Stock in respect of fractional shares);
40
<PAGE>
(c) The aggregate tax basis of the shares of Hologic Common Stock
received by a holder of FluoroScan Common Stock in the Merger will be the
same as the aggregate tax basis of FluoroScan Common Stock surrendered in
exchange therefor by such stockholder, reduced by amounts allocable to
fractional shares for which cash is to be received;
(d) The holding period of the shares of Hologic Common Stock received in
the Merger by the holders of FluoroScan Common Stock will include the
period during which the shares of FluoroScan Common Stock surrendered in
exchange therefor were held, provided that FluoroScan Common Stock is held
as a capital asset in the hands of the holders of FluoroScan Common Stock
on the date of the exchange; and
(e) Cash payments received by holders of FluoroScan Common Stock in lieu
of a fractional share will be treated as if such fractional share of
Hologic Common Stock had been issued in the Merger and then redeemed by
Hologic. A holder of FluoroScan Common Stock receiving such cash will
generally recognize gain or loss, upon such payment, measured by the
difference (if any) between the amount of cash received and the basis in
such fractional share.
The foregoing opinions are based upon the representation of management of
Hologic that the Hologic Purchase Rights have no value and that the likelihood
of their being exercisable is both speculative and remote. In the event that
such rights were determined to have value, the FluoroScan shareholders might
recognize taxable income, limited in the case of each shareholder to the
lesser of the gain realized upon the Merger or the value of the rights.
In rendering their opinions, Brown, Rudnick, Freed and Gesmer and Katten
Muchin & Zavis will rely upon information contained in this Proxy
Statement/Prospectus, representations and warranties of FluoroScan and Hologic
and certificates of officers of FluoroScan and Hologic with regard to the
particular facts and circumstances applicable to the transactions
contemplated, without independent verification. In particular, the opinion
will be issued in reliance on certain representations from FluoroScan and
Hologic and certain principal stockholders of FluoroScan and Hologic with
respect to the satisfaction of the continuity of interest requirement of the
regulations interpreting Section 368 of the Code, and certain other matters.
A successful IRS challenge to the reorganization status of the Merger would
result in a holder of FluoroScan Common Stock recognizing gain or loss with
respect to each share of FluoroScan Common Stock surrendered equal to the
difference between the stockholder's basis in such share and the fair market
value, as of the date of the Merger, of the shares of Hologic Common Stock
received in exchange therefor. In such event, a stockholder's aggregate basis
in the shares of Hologic Common Stock so received would equal its fair market
value, and the stockholder's holding period for such stock would begin the day
after the Merger.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Hologic and FluoroScan have been advised by,
and will receive letters from Arthur Andersen LLP, Hologic's independent
accountants, and BDO Seidman, LLP, FluoroScan's independent accountants, to
the effect that, the Merger will qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of Hologic and FluoroScan will be carried
forward to Hologic at their recorded amounts, the consolidated income of
Hologic will include income of Hologic and FluoroScan for the entire fiscal
year in which the combination occurs and the reported income of the separate
companies for prior periods will be combined and restated as consolidated
income of Hologic. See "The Merger and Related Transactions--Conditions to the
Merger" and "Hologic, Inc. Unaudited Pro Forma Combined Condensed Financial
Statements."
The respective affiliates of Hologic and FluoroScan have each executed
written agreements to the effect that such person will not transfer shares of
Hologic Common Stock or FluoroScan Common Stock until the date that Hologic
publishes financial statements which reflect 30 days of post-merger combined
continued operations of Hologic (which agreements relate to the ability of
Hologic to account for the Merger as a pooling of interests).
41
<PAGE>
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Hologic Common Stock to be issued in the Merger will be freely
transferable, except that any shares of Hologic Common Stock received by
persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of FluoroScan or Hologic prior to the Merger may be sold by
them only in transactions permitted by the resale provisions of Rule 145 under
the Securities Act with respect to affiliates of FluoroScan, or Rule 144 under
the Securities Act with respect to persons who are or become affiliates of
Hologic, or as otherwise permitted under the Securities Act. Persons who may
be deemed to be affiliates of FluoroScan or Hologic generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of
such party as well as principal stockholders of such party.
Affiliates of FluoroScan may not sell their shares of Hologic Common Stock,
except pursuant to an effective registration statement under the Securities
Act covering such shares or in compliance with Rule 145 (or Rule 144 under the
Securities Act in the case of persons who are or become affiliates of Hologic)
or another applicable exemption from the registration requirements of the
Securities Act. In general, under Rule 145, for two years following the
Effective Time, an affiliate of FluoroScan prior to the Merger (together with
certain related persons) will be entitled to sell shares of Hologic Common
Stock acquired in the Merger only through unsolicited "broker transactions" or
in transactions directly with a "market maker," as such terms are defined in
Rule 144. Additionally, the number of shares to be sold by such an affiliate
(together with certain related persons and certain persons acting in concert)
within any three-month period for purposes of Rule 145 may not exceed the
greater of 1% of the outstanding shares of Hologic Common Stock or the average
weekly trading volume of the shares of Hologic Common Stock during the four
calendar weeks preceding such sale. Rule 145 will only remain available,
however, to persons who were affiliates of FluoroScan prior to the Merger, if
Hologic remains current with its informational filings with the Commission
under the Exchange Act. Two years after the Effective Time, a person who was
an affiliate of FluoroScan prior to the Merger will be able to sell shares of
Hologic Common Stock without regard to such manner of sale or volume
limitations, provided that Hologic is current with its Exchange Act
informational filings and such person is not then an affiliate of Hologic.
Three years after the Effective Time, a person who was an affiliate of
FluoroScan prior to the Merger will be able to sell such shares of Hologic
Common Stock without any restrictions so long as such person had not been an
affiliate of Hologic for at least three months prior to the sale.
REGULATORY MATTERS
Neither Hologic nor FluoroScan is aware of any governmental or regulatory
approvals required for the consummation of the Merger other than (i)
compliance with the HSR Act, as described below, (ii) compliance with
applicable securities laws and (iii) certain filings under Delaware Law.
The Merger is subject to the HSR Act and the rules and regulations
thereunder, which provide that certain transactions may not be consummated
until required information and materials have been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the
Federal Trade Commission
(the "FTC") and certain waiting periods have been expired or been terminated.
On August 1, 1996, Hologic and FluoroScan filed the required information and
materials with the Antitrust Division and FTC and requested early termination
of the waiting period under the HSR Act.
Hologic's and FluoroScan's request for early termination of the waiting
period under the HSR Act has not yet been granted, however, neither party is
aware of any reason why the Antitrust Division or the FTC will deny the
request for early termination. The termination of the HSR Act waiting periods
does not preclude the Antitrust Division or the FTC from challenging the
Merger (or any part thereof) on antitrust grounds. Accordingly at any time
before or after the Effective Time, either the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, or certain other persons, including the
attorney general of one or more states or private parties, could take action
under the antitrust laws, including seeking to enjoin the Merger (or any part
thereof). There can be no assurance that a challenge to the Merger will not be
made or, if such a challenge is made, that Hologic or FluoroScan will prevail.
42
<PAGE>
NASDAQ NATIONAL MARKET LISTING
Pursuant to the Merger Agreement, Hologic has agreed to cause the shares of
Hologic Common Stock to be issued in the Merger to be listed, upon official
notice of issuance, on the Nasdaq National Market.
NO APPRAISAL RIGHTS
Under the Delaware Law, the holders of FluoroScan Common Stock are not
entitled to any dissenters' rights of appraisal with respect to the Merger.
WAIVER AND AMENDMENT
The Merger Agreement may not be amended except by a written agreement signed
by Hologic, Merger Sub and FluoroScan.
43
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
HOLOGIC, INC.
The following table contains certain selected consolidated financial data of
Hologic and is qualified by the more detailed Hologic Consolidated Financial
Statements and Notes thereto included elsewhere in this Proxy
Statement/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 the Consolidated Financial
Statements, which statements have been audited by Arthur Andersen LLP,
independent public accountants, and are included elsewhere in this Proxy
Statement/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 Hologic Consolidated Financial Statements, which statements
have been audited by Arthur Andersen LLP and are not included on this Proxy
Statement/Prospectus. The unaudited Hologic Consolidated Financial Statements
as of March 30, 1996 and for the six months ended March 25, 1995 and March 30,
1996 have been prepared on the same basis as the Hologic audited financial
statements, and in the opinion of Hologic's management, include all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The results of
operations for the six months ended March 30, 1996 are not necessarily
indicative of future operating results. The data set forth below is qualified
by reference to, and should be read in conjunction with the Hologic
Consolidated Financial Statements and Notes thereto and "Hologic Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED(2) SIX MONTHS ENDED
--------------------------------------------------------- -------------------
SEPTEMBER 30,
--------------- SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 25, MARCH 30,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------------- ------------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Product sales.......... $15,258 $26,197 $24,140 $37,056 $41,130 $18,304 $32,067
Other revenue.......... 1,799 73 708 1,428 2,270 926 1,454
------- ------- ------- ------- ------- ------- -------
17,057 26,270 24,848 38,484 43,400 19,230 33,521
Costs and Expenses:
Cost of product sales.. 8,464 13,469 13,729 20,865 22,091 10,236 15,212
Research and
development........... 3,559 3,608 3,182 3,442 4,301 2,077 3,077
Selling and marketing.. 2,373 4,692 5,472 5,893 7,835 3,534 5,758
General and
administrative........ 1,249 3,132 3,501 4,189 4,461 2,040 3,250
Litigation
expenses(3)(5)........ 1,190 -- -- -- 2,534 352 798
Restructuring
costs(4).............. -- -- 900 -- -- -- --
------- ------- ------- ------- ------- ------- -------
16,835 24,901 26,784 34,389 41,222 18,239 28,095
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. 222 1,369 (1,936) 4,095 2,178 991 5,426
Interest income......... 793 502 300 316 610 283 749
Other income (expense).. -- 231 (439) (81) (268) (157) (124)
------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... 1,015 2,102 (2,075) 4,330 2,520 1,117 6,051
Provision (benefit) for
income taxes........... 314 623 (300) 1,335 650 320 1,720
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 701 $ 1,479 $(1,775) $ 2,995 $ 1,870 $ 797 $ 4,331
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
common and common
equivalent share:
Primary................ $ 0.09 $ 0.18 $ (0.23) $ 0.36 $ 0.21 $ 0.09 $ 0.42
Fully diluted.......... 0.34 0.20
Weighted average number
of common and common
equivalent shares
outstanding(1):
Primary................ 8,099 8,101 7,860 8,390 8,752 8,799 10,298
======= ======= ======= ======= ======= ======= =======
Fully diluted.......... 8,684 9,151
======= =======
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 30,
1991 1992 1993 1994 1995 1996
------- ------- ------------- ------------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital......... $15,503 $16,427 $14,540 $17,688 $19,370 $74,559
Total liabilities....... 3,135 4,578 5,854 8,625 11,190 12,868
Total assets............ 19,809 22,695 22,166 28,497 33,862 91,486
Stockholders' equity.... 16,674 18,117 16,312 19,872 22,672 78,618
</TABLE>
- --------
(1) All shares and per share data has been adjusted to reflect a two-for-one
stock split in the form of a stock dividend on March 25, 1996.
(2) Hologic changed its fiscal year end from September 30 to the last Saturday
in September effective with the fiscal year ended September 25, 1993.
(3) Fiscal 1991 expenses include litigation expenses of $1.2 million before
income taxes ($800,000 after income taxes or $0.10 per share).
(4) Fiscal 1993 expenses include restructuring charge of $900,000 (before and
after income taxes or $0.11 per share), relating to the reorganization of
Hologic's European operations.
(5) Fiscal 1995 litigation expenses of $2.5 million before income taxes
(approximately $1.8 million after income taxes or $0.21 per share),
primarily relating to certain patent litigation. A definitive agreement
was reached by Hologic and the other party to this litigation in November
1995 settling all outstanding disputes. See "Information Regarding
Hologic--Patents and Proprietary Rights."
45
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
The following table contains certain selected consolidated financial data of
FluoroScan and is qualified by the more detailed FluoroScan Consolidated
Financial Statements and Notes thereto included elsewhere in this Proxy
Statement/Prospectus. The consolidated statement of operations data for the
fiscal years ended December 31, 1993, 1994 and 1995 and the consolidated
balance sheet data as of December 31, 1994 and 1995 have been derived from the
Consolidated Financial Statements, which statements have been audited by BDO
Seidman, LLP, independent certified public accountants, and are included
elsewhere in this Proxy Statement/Prospectus. The unaudited FluoroScan
Consolidated Financial Statements as of March 31, 1996 and for the three
months ended March 31, 1995 and 1996 have been prepared on the same basis as
the FluoroScan audited financial statements, and in the opinion of
FluoroScan's management, include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the information
set forth therein. The results of operations for the three months ended March
31, 1996 are not necessarily indicative of future operating results. The data
set forth below is qualified by reference to, and should be read in
conjunction with the FluoroScan Consolidated Financial Statements and Notes
thereto and "FluoroScan Management's Discussion and Analysis of Financial
Condition" appearing elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
---------------------------------- --------------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net sales............... $6,927,761 $9,170,505 $13,146,979 $ 2,490,922 $ 3,502,034
Cost of goods sold...... 2,732,536 3,656,651 5,458,029 1,038,058 1,506,216
---------- ---------- ----------- ----------- -----------
Gross profit............ 4,195,225 5,513,854 7,688,950 1,452,864 1,995,818
Selling general and
administrative
expense................ 3,493,466 3,720,521 5,832,622 1,020,377 1,412,315
---------- ---------- ----------- ----------- -----------
Operating income........ 701,759 1,793,333 1,856,328 432,487 583,503
Other Income (Expense):
Other income.......... 410,360 150,439 211,842 50,250 35,175
Litigation expense.... (145,909) -- -- -- --
Interest expense...... (7,098) -- -- -- --
Interest income....... 14,212 120,995 273,567 56,085 58,933
---------- ---------- ----------- ----------- -----------
271,565 271,434 485,409 106,335 94,108
---------- ---------- ----------- ----------- -----------
Income before income
taxes.................. 973,324 2,064,767 2,341,737 538,822 677,611
Income taxes (benefit).. (485,000) 292,000 863,000 198,200 274,000
---------- ---------- ----------- ----------- -----------
Net income.............. 1,458,324 1,772,767 1,478,737 340,622 403,611
========== ========== =========== =========== ===========
Net income per share.... $ 0.52 $ 0.57 $ 0.43 $ 0.10 $ 0.12
========== ========== =========== =========== ===========
Weighted average common
shares and shares
equivalents
outstanding............ 2,787,303 3,106,721 3,472,519 3,506,538 3,495,417
========== ========== =========== =========== ===========
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995 MARCH 31, 1996
----------- ----------- --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital............................... $ 6,279,612 $ 7,819,679 $ 8,248,456
Total liabilities............................. 801,493 1,360,798 1,482,124
Total assets.................................. 8,172,681 10,220,745 10,745,682
Stockholders' equity.......................... 7,371,188 8,859,947 9,263,558
</TABLE>
46
<PAGE>
HOLOGIC UNAUDITED SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following selected summary unaudited pro forma financial data is derived
from the pro forma combined condensed financial statements appearing elsewhere
herein, which give effect to the Merger as a pooling of interests, and should
be read in conjunction with such pro forma statements and notes thereto.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the combination had been consummated, nor is it
necessarily indicative of the future operating results or financial position
of Hologic or FluoroScan.
<TABLE>
<CAPTION>
SIX
FISCAL YEARS ENDED MONTHS ENDED
----------------------------------------- ------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 30,
1993 1994 1995 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Product sales......... $31,067 $46,227 $54,277 $39,447
Other revenue......... 709 1,427 2,270 1,454
------- ------- ------- -------
31,776 47,654 56,547 40,901
Costs and Expenses:
Cost of product
sales................ 16,462 24,522 27,548 18,333
Research and
development.......... 3,481 3,655 4,499 3,156
Selling, general and
administrative....... 12,168 13,589 17,931 12,110
Litigation expenses... -- -- 2,533 798
Restructuring costs... 900 -- -- --
------- ------- ------- -------
33,011 41,766 52,513 34,397
------- ------- ------- -------
Income (loss) from
operations............. (1,235) 5,888 4,034 6,504
Other income (expense).. 133 507 827 848
------- ------- ------- -------
Income (loss) before
income taxes........... (1,102) 6,395 4,861 7,352
Provision (benefit) for
income taxes........... (785) 1,627 1,513 2,214
------- ------- ------- -------
Net income (loss)....... $ (317) $ 4,768 $ 3,348 $ 5,138
======= ======= ======= =======
Net income (loss) per
common and common
equivalent share:
Primary............... $ (0.03) $ 0.49 $ 0.33 $ 0.44
======= ======= ======= =======
Fully diluted......... $ 0.47 $ 0.32
======= =======
Weighted average number
of common and common
equivalent shares
outstanding:
Primary............... 9,296 9,826 10,188 11,735
======= ======= ======= =======
Fully diluted......... 10,120 10,587
======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 30,
1996
---------
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................................................... $ 82,808
Total liabilities..................................................... 14,350
Total assets.......................................................... 102,232
Stockholders' equity.................................................. 87,882
</TABLE>
47
<PAGE>
COMPARATIVE MARKET PRICE DATA
HOLOGIC
Hologic'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 Hologic Common Stock, as reported by
the Nasdaq National Market. All sales prices have been adjusted to reflect a
two-for-one stock split in the form of a stock dividend effected by Hologic in
March 1996.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1994 Fiscal Year
First Quarter ended December 26, 1993..................... $ 2.50 $ 1.75
Second Quarter ended March 26, 1994....................... 3.69 1.69
Third Quarter ended June 25, 1994......................... 7.00 3.19
Fourth Quarter ended September 24, 1994................... 9.00 4.88
1995 Fiscal Year
First Quarter ended December 31, 1994..................... 9.06 6.13
Second Quarter ended March 25, 1995....................... 9.38 6.63
Third Quarter ended June 24, 1995......................... 8.69 4.50
Fourth Quarter ended September 30, 1995................... 12.56 7.69
1996 Fiscal Year
First Quarter ended December 30, 1995..................... 22.75 10.38
Second Quarter ended March 30, 1996....................... 26.75 17.25
Third Quarter ended June 29, 1996......................... 49.50 21.00
Fourth Quarter ending September 28, 1996 (through August
5, 1996)................................................. 49.00 27.50
</TABLE>
FLUOROSCAN
FluoroScan's Common Stock is traded on the Nasdaq National Market under the
symbol "FLRO." The following table sets forth, for the periods indicated, the
high and low sales prices per share of FluoroScan Common Stock, as reported by
the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
1994 Fiscal Year
Third Quarter ended September 30, 1994(1).................. $ 8.06 $6.00
Fourth Quarter ended December 31, 1994..................... 8.38 5.69
1995 Fiscal Year
First Quarter ended March 31, 1995......................... 9.00 6.00
Second Quarter ended June 30, 1995......................... 8.25 5.75
Third Quarter ended September 30, 1995..................... 10.13 6.50
Fourth Quarter ended December 31, 1995..................... 10.13 6.13
1996 Fiscal Year
First Quarter ended March 31, 1996......................... 8.75 5.75
Second Quarter ended June 30, 1996......................... 11.13 6.38
Third Quarter ending September 30, 1996 (through August 5,
1996)..................................................... 11.63 6.75
</TABLE>
- --------
(1) FluoroScan's initial public offering was completed on July 11, 1994.
RECENT MARKET PRICES
The following table sets forth the closing prices per share of the Common
Stock of Hologic and FluoroScan, respectively, on the Nasdaq National Market
on July 18, 1996, the last trading day preceding the public announcement of
the Merger, and on August 5, 1996, the latest practicable trading day before
the printing of
48
<PAGE>
this Proxy Statement/Prospectus, and the equivalent per share prices of the
FluoroScan Common Stock based on the closing prices of the Hologic Common
Stock multiplied by the Conversion Ratio:
<TABLE>
<CAPTION>
HOLOGIC COMMON FLUOROSCAN FLUOROSCAN
STOCK COMMON STOCK EQUIVALENT
-------------- ------------ ----------
<S> <C> <C> <C>
July 18, 1996........................ $39.38 $7.88 $12.23
August 5, 1996....................... 37.25 11.38 11.57
</TABLE>
NUMBER OF HOLDERS
As of the Record Date, there were 262 holders of record of Hologic Common
Stock and 92 holders of record of FluoroScan Common Stock, as shown on the
records of their respective transfer agents.
DIVIDEND POLICY
Neither Hologic nor FluoroScan has ever paid or declared any dividends on
its stock. Hologic's current policy is to retain all of its earnings to
finance future growth.
FLUOROSCAN STOCKHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
HOLOGIC COMMON STOCK AND FLUOROSCAN COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS
TO THE MARKET PRICES OF HOLOGIC COMMON STOCK OR FLUOROSCAN COMMON STOCK AT, OR
IN THE CASE OF HOLOGIC COMMON STOCK AFTER, THE EFFECTIVE TIME OF THE MERGER.
49
<PAGE>
INFORMATION REGARDING HOLOGIC
Hologic 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.
Hologic 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, Hologic 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, Hologic is developing products that it believes
will complement its DXA product line. In December 1994, Hologic acquired the
ultrasound bone analyzer business of Walker Sonix, Inc. ("Walker Sonix").
Hologic is developing an enhanced ultrasound bone analyzer, the Sahara, which
it has recently introduced in clinical test sites in the United States and
certain international markets. Hologic 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, Hologic 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.
Hologic 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. Hologic 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.
Therapies. Hologic 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
50
<PAGE>
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.
In September 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 reported that in clinical studies of Fosamax conducted in
over 16 countries post-menopausal patients with established osteoporosis who
were treated with Fosamax gained on 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, and in April 1996 filed a supplement with
the FDA for approval of the use of Fosamax for that purpose. Fosamax is also
approved in approximately 40 countries in addition to the United States. In
March 1996, Merck reported that more than 475,000 patients worldwide were
taking Fosamax.
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, Hologic 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.
Diagnosis and Monitoring of Osteoporosis. There are a number of different
technologies that are available that can be used to assess bone mineral
status.
Since the introduction of the first DXA bone densitometer by Hologic 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. 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
51
<PAGE>
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 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.
Hologic 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 calcaneous (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 calcaneous 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, Hologic believes
that the most likely use for ultrasound techniques currently employed and
under development by Hologic 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, Hologic believes that biochemical marker tests, including those
being developed by Hologic, will complement and not replace densitometry.
Market. Hologic 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
52
<PAGE>
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. Hologic 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. In April 1996,
Merck filed a supplement with the United States FDA for a new indication for
Fosamax--the prevention of osteoporosis in women. Such approval would increase
the need for patient testing and monitoring at an earlier age, before a
patient is afflicted with osteoporosis.
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.
With the recent increase in reimbursement levels in the United States, and
the FDA approval of Fosamax and other drug therapies, Hologic believes that
the United States market for bone densitometers and other methods of bone
mineral assessment will expand from the 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
Hologic'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. Hologic has been a
pioneer in the development of DXA bone densitometers. Since commercially
introducing the first DXA bone densitometer in 1987, Hologic 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 Hologic's most advanced X-ray technology into a
compact package that facilitates installation in a standard examination room.
Hologic 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
53
<PAGE>
involving the emerging drug therapies for osteoporosis. Hologic 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. Hologic 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, Hologic is pursuing the development and
acquisition of products that use ultrasound and biochemical markers to assess
bone mineral status. Recent milestones achieved by Hologic in connection with
this pursuit include the following:
. In December 1994, Hologic acquired the Walker Sonix ultrasound bone
analyzer business.
. In September 1995, Hologic 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.
. In September 1994, Hologic began a joint development effort with Serex
to develop a low-cost biochemical marker strip test.
. In December 1995, Hologic 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.
Hologic 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. Hologic also plans to pursue
other product development and market opportunities in the area of bone
assessment that Hologic identifies as promising.
Expand United States Distribution. Hologic believes that the continued
development of its distribution network in the United States will be an
important factor in its continued success. Hologic has developed an
experienced 61 person direct sales force covering the United States, has
recently entered into agreement with Leisegong Medical Systems for the
exclusive distribution of certain of Hologic's products to gynecologists and
primary care physicians, 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 Hologic's products.
Continued International Expansion. International sales have accounted for
approximately 56% and 75% of Hologic's sales in the first six months of fiscal
1996 and fiscal 1995, respectively, with such sales being made predominantly
to countries in Western Europe and Japan. In fiscal 1995, Hologic 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.
Hologic intends to continue to seek to expand sales in these and other less-
developed territories.
Diversification into Complementary Markets. Hologic 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, as
represented by FluoroScan, or other women's healthcare markets.
There can be no assurance that Hologic 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 Hologic to
maintain or enhance its growth.
BONE ASSESSMENT PRODUCTS
Hologic'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,
Hologic
54
<PAGE>
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 Hologic's most advanced X-ray technology into a compact package
that facilitates installation in a standard examination room. The United
States list prices for Hologic's DXA bone densitometers range from
approximately $55,000 to $165,000 per system.
Hologic 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, Hologic has acquired or is developing products that use
ultrasound or measure biochemical markers to assist in the assessment of bone
mineral status.
QDR X-Ray Bone Densitometers. Since Hologic's first commercial shipment of a
DXA system in October 1987, Hologic has sold more than 2,800 DXA systems.
Hologic believes that its systems' performance advantages and their early
adoption by leading clinical investigators have led to their market
acceptance. Hologic'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 Hologic'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 Hologic 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 Hologic's DXA systems employ Hologic'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 Hologic'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
Hologic'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.
Hologic 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 Hologic employed a single narrow pencil
beam detected by one receptor. In 1991, Hologic 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.
55
<PAGE>
Hologic 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 Hologic'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, Hologic 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. See
"Information Regarding Hologic--Regulation."
Hologic'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. The images produced can be combined with capabilities that
enable vertebral dimensions to be determined with a radiation dose
approximately ten to 100 times lower than that of conventional chest X-rays.
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 Hologic's QDR 1500, QDR 2000 and QDR
2000plus products. Hologic has retained its QDR 1000plus system as a low-price
offering. The QDR 1000plus employs Hologic's older pencil beam technology. In
the first six months of fiscal 1996, the ACCLAIM series accounted for
approximately 89% of DXA sales.
Ultrasound. In December 1994, Hologic 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.
56
<PAGE>
Hologic developed internally an enhanced dry ultrasound bone analyzer,
called "Sahara" that does not require the use of water. Hologic believes that
this "dry" technology does offers further operator convenience by the
elimination of the water handling required between each patient. The
elimination of the use of water has also enabled Hologic to reduce the size
and weight of the device. In September 1995, Hologic introduced a prototype of
the Sahara at the American Society of Bone Mineral Research. Hologic initiated
clinical trials of the Sahara in the United States in the fourth quarter of
fiscal 1995 and commenced international sales of the system in the third
quarter of fiscal 1996. Commercial introduction of the system in the United
States is dependent upon FDA approval. Hologic believes that this approval
process may take as long as two to three years. There can be no assurance that
Hologic will be able to obtain FDA approval for the Sahara on a timely basis,
if at all.
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, Hologic 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, Hologic 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, Hologic 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, Hologic 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
Hologic 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, Hologic purchased a minority interest in Serex and entered into a
license and supply agreement with Serex to develop a urine-based bone
resorption test deliverable in a diagnostic strip test format. Hologic
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, Hologic retains the first right of negotiation 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.
OTHER PRODUCTS; SCANORA
In order to take advantage of its European sales force and associated
distribution capability, in May 1993, Hologic entered into exclusive
distribution agreement with Soredex, S.A. ("Soredex"), a division of Orion
57
<PAGE>
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, Hologic is the exclusive distributor of Scanora systems
in Western Europe, the Middle East and Africa, excluding South Africa and
Namibia. In addition, Hologic has non-exclusive distribution rights in several
Eastern European countries. The agreement with Soredex provides for Hologic to
purchase a minimum number of systems in each contract year. In the event that
Hologic does not achieve the minimum levels set forth under this agreement,
Soredex has the option to terminate the distribution agreement. Hologic has
met its minimum purchase requirements in each year of the contract. The
agreement expired in May 1996, subject to the rights of each party to pursue
an extension under conditions to be agreed upon at such time. Hologic intends
to seek an extension of the distribution agreement. There can be no assurance
that Hologic and Soredex will agree to an extension of the distribution
agreement on favorable terms, if at all.
CUSTOMERS
Hologic's DXA customers include many pharmaceutical companies active in the
field of bone mineral metabolism, such as Eli Lilly, Merck, Pfizer, Proctor &
Gamble, Rhone-Poulenc/Rorer, Sanofi Research and SmithKline. Hologic 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. Hologic has a group of
11 employees who provide data collection and quality assurance services to
such customers. Initial clinical evaluation sites for Hologic'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 Hologic's DXA
systems.
The clinical demand for Hologic'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 75%
of Hologic's new sales of DXA systems have shifted to the clinical segment of
the market which includes radiologists, endocrinologists and rheumatologists.
Hologic 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.
In the first six months of fiscal 1996 and fiscal 1995, Hologic's sales to
its Japanese distributor, Toyo Medic, accounted for approximately 20% of
product sales. The loss of Toyo Medic as a customer of Hologic or an adverse
change in the relationship between Hologic and Toyo Medic could have a
material adverse affect on Hologic's business.
MARKETING AND SALES
In the United States, Hologic sells its DXA systems primarily through its
direct sales force. As of June 30, 1996, Hologic had approximately 16
employees engaged in sales in the United States. In order to penetrate this
market more effectively, Hologic 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. To
meet the growing demand for its products, Hologic plans to enhance further its
distribution capabilities in the United States through
58
<PAGE>
a combination of an expansion of its sales force and strategic alliances with
companies with established distribution channels in the various market
segments for Hologic's products. In the first quarter of Fiscal 1996, Hologic
entered into a distribution agreement with Leisegang Medical Systems. Under
this Agreement Leisegang has the exclusive right (subject to attaining certain
quotas) to represent certain Hologic products to OB/GYN and primary care
physicians in the United States.
Hologic 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 June 30, 1996, Hologic had eight
employees engaged in sales in Europe.
Hologic distributes its products in Japan through Toyo Medic, which has been
Hologic'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, Hologic 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 Hologic's products.
Hologic 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. Hologic
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 the first six months of fiscal 1996 and in fiscal 1995, foreign sales
accounted for approximately 56% and 75% of Hologic's product sales,
respectively. Hologic 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 Hologic's efforts to develop
new foreign markets. Hologic'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
Hologic's sales to foreign countries. Hologic 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 "Hologic Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 11 of Notes to Hologic
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 Hologic. See "Information Regarding Hologic--Background."
Five companies, Lunar, Norland Medical Systems, Aloka, Hitachi and
Osteometer, have developed DXA systems to measure bone density which compete
with Hologic's systems. Hologic 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. Hologic believes that it competes
effectively with respect to these criteria. Hologic believes that its DXA
systems will also compete with other X-ray based modalities, including a
radiographic absorptiometry product developed by CompuMed Inc. which has been
licensed to Merck. Hologic's DXA systems also compete with specially-
59
<PAGE>
equipped CT scanners and may compete with used and refurbished DXA systems.
See "Information Regarding Hologic--Background" for a discussion of the
technical advantages and disadvantages of these other systems.
Several companies, including Igea SPA, McCue Ultrasonics, Lunar, Myriad
Ultrasound, Osteometer and Metra Biosysems, Sofratest and Vitel have developed
ultrasound systems to assess bone mineral status. Some of these companies have
had substantially more experience than Hologic in developing and marketing
their systems. Hologic 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.
Hologic believes that advantages of its Sahara ultrasound bone analyzer system
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 Hologic and others, could have a
significant impact on their respective market shares. Hologic believes that
ultrasound systems will compete with DXA systems in the diagnostic market for
initial screening of patients. However, Hologic 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 Hologic 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 Hologic and Serex will be able to compete
effectively in this market.
MANUFACTURING
Hologic's manufacturing operations for its DXA and ultrasound systems
consist primarily of assembly, test, burn-in and quality control. Hologic
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.
Hologic 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 Hologic's sales
of those systems.
BACKLOG
Backlog for Hologic's systems as of June 29, 1996 and June 24, 1995 totaled
approximately $8.4 million and $4.2 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 Hologic's net
revenues for any future period.
RESEARCH AND DEVELOPMENT
Hologic's research and development efforts are focused on enhancing its
existing products and developing new products for the bone assessment market.
Hologic's research and development personnel also are involved in establishing
protocols, monitoring, interpreting and submitting test data to the FDA and
other regulatory agencies to obtain the requisite clearances and approvals for
its products. At June 30, 1996, Hologic had 41 persons engaged in research and
development, of whom 28 persons were engaged in the enhancement of the
60
<PAGE>
DXA product line and 13 persons were engaged in the development and
enhancement of Hologic's ultrasound systems. Of these persons, 12 persons were
engaged in software development. The research and development group was
responsible for the introduction of Hologic's fourth generation QDR ACCLAIM
series of DXA bone densitometers during 1995 and the ongoing development of
Hologic's Sahara bone analyzer. During the first six months of fiscal 1995,
and during fiscal 1995, 1994 and 1993, Hologic's research and product
development expenses were approximately $3.1 million, $4.3 million, $3.4
million and $3.2 million, respectively.
PATENTS AND PROPRIETARY RIGHTS
Hologic relies upon trade secrets and patents to protect its technology. Due
to the rapid technological change that characterizes the medical
instrumentation industry, Hologic 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, Hologic has obtained patents and will continue to make efforts
to obtain patents, when available, in connection with its product development
program. Hologic has obtained 12 patents, licensed five patents and has
pending 18 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. Hologic 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 Hologic's patent applications will be granted or that any patent or patent
application will provide significant protection for Hologic's products and
technology. Moreover, there can be no assurance that foreign intellectual
property laws will protect Hologic's intellectual property rights. In the
absence of significant patent protection, Hologic may be vulnerable to
competitors who attempt to copy Hologic's products, processes or technology.
In September 1994, Serex granted Hologic an exclusive license to use Serex's
technology to manufacture, market, sell and distribute the biochemical marker
strip test being developed under a joint development agreement between Serex
and Hologic. Serex further granted Hologic the right of first negotiation with
respect to the development and distribution of new products conceived of by
Serex for application in bone metabolism. In order to maintain its exclusive
rights, Hologic is required to purchase a certain minimum number of tests or
pay Serex amounts that would have been paid had Hologic purchased the minimum
number of tests. If Hologic does not meet these minimum requirements, its
rights become nonexclusive.
In June 1989, Hologic granted an exclusive worldwide license of certain of
its DXA technology to Vivid Technologies, Inc., an affiliate of S. David
Ellenbogen and Jay A. Stein, the Chief Executive Officer and Senior Vice
President of Hologic, for the sole purpose of developing a baggage inspection
and security system.
Until recently, Hologic 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. Hologic 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 Hologic's technology in a manner that would materially and adversely
affect Hologic's business and results of operations.
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 bone evaluations at an initial rate of $68 per scan
effective April 1994, which was increased to $124, effective
61
<PAGE>
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. In addition, in Japan,
where there is a general aversion to ionizing devices, the government has
initiated a program to subsidize purchases of ultrasound bone densitometers.
As a result, there is much greater use of ultrasound bone densitometers in
Japan than in any other country. However, DXA bone densitometers continue to
account for a substantial portion of the Japanese market.
REGULATION
The medical devices manufactured and marketed by Hologic 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. Hologic'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 Hologic'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. Hologic 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. Hologic 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. Hologic believes that the approval
to market its ultrasound products and its over-the-counter biochemical market
strip test, once developed, in the United States may be subject to this more
stringent FDA review process.
Hologic's systems are also subject to approval by certain foreign regulatory
and safety agencies.
No assurance can be given that the FDA or foreign regulatory agencies will
give the requisite approvals or clearances for any of Hologic'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
Hologic 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 Hologic's
products.
As a manufacturer of medical devices, Hologic is subject to certain other
FDA regulations and Hologic's manufacturing processes and facilities are
subject to continuing review by the FDA. Most states and certain other
62
<PAGE>
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. Hologic cannot predict what impact, if
any, such changes might have on its business.
EMPLOYEES
As of June 30, 1996, Hologic had 241 full-time employees, including 75 in
manufacturing operations, 41 in research and development, 87 in marketing,
sales and support services, 27 in finance and administration and 11 in medical
data management. None of Hologic's employees are represented by a union.
Hologic considers its employee relations to be good.
PROPERTIES
Hologic leases a 83,500 square foot building located in Waltham,
Massachusetts under a lease which expires in 2002. Hologic also leases an
additional 3,100 square feet of nearby office space under a tenancy at will.
Hologic believes that its facilities will be adequate for its needs for the
foreseeable future. Hologic also maintains sales and service offices in
France, Belgium and Spain. Hologic believes that it has adequate space for its
anticipated needs and that suitable additional space will be available at
commercially reasonable prices as needed.
LITIGATION
On November 22, 1995, Hologic and Lunar entered into a settlement agreement
relating to litigation involving allegations of each party against the other
of patent infringement. See "Information Regarding Hologic--Patents and
Proprietary Rights."
Until recently, Hologic had been involved in litigation brought in January
1995 by B.V. Optische Industrie de Oude Delft and two subsidiaries ("Oldelft")
claiming damages relating to a prior patent dispute. On December 14, 1995, the
United States District Court for the Southern District of New York granted
Hologic's Motion to Dismiss and dismissed all claims against Hologic. In
January 1996, Oldelft filed a motion for reconsideration of the dismissal and
amended its complaint. In April 1996, the Court denied Oldelft its motion for
reconsideration of the dismissal, and in May 1996 Hologic and Oldelft settled
this matter.
63
<PAGE>
HOLOGIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Since inception, Hologic 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. Hologic's revenues increased 75% to $43.4 million in
1995 from $24.8 million in 1993. During 1995, Hologic's net income was
adversely impacted by litigation costs of $2.5 million, or $0.21 per share,
incurred in connection with Hologic's dispute with Lunar, which was settled in
November 1995, and, to a lesser extent, its dispute with Oldelft which was
dismissed in December 1995. In fiscal 1993, Hologic'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 reform. 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, Hologic was
successful in its efforts to develop new international markets in Latin
America and the Pacific Rim.
Hologic commenced operations in April 1986 and was primarily engaged in
product development through the end of fiscal 1987. Hologic 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. Hologic
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. Hologic'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 first six months of fiscal 1996, ACCLAIM sales represented
approximately 90% of Hologic's total DXA sales. Hologic 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.
Hologic 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.
RECENT DEVELOPMENTS
For the three and nine months ended June 29, 1996, Hologic reported revenues
of $22,829,028 and $56,349,729, respectively, as compared with revenues of
$11,301,320 and $30,531,294 for the same periods ended June 24, 1995. Hologic
also reported net income for the three and nine months ended June 29, 1996 of
$3,940,030, or $.32 per share, and $8,271,037, or $.76 per share,
respectively, as compared with net income of $487,668, or $.06 per share, and
$1,284,998, or $.15 per share, for the same periods ended June 24, 1995.
64
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
revenues represented by items as shown in Hologic's consolidated statements of
operations.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
----------------------------------------- -------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
REVENUES: ------------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Product sales......... 97.1% 96.3% 94.8% 95.2% 95.7%
Other revenue......... 2.9 3.7 5.2 4.8 4.3
----- ----- ----- ----- -----
100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
COSTS AND EXPENSES:
Cost of product
sales................ 55.3 54.2 50.9 53.3 45.4
Research and
development.......... 12.8 8.9 9.9 10.8 9.1
Selling and
marketing............ 22.0 15.3 18.1 18.4 17.2
General and
administrative....... 14.1 10.9 10.3 10.6 9.7
Restructuring costs... 3.6 -- -- -- --
Litigation expenses... -- -- 5.8 1.8 2.4
----- ----- ----- ----- -----
107.8 89.3 95.0 94.9 83.8
----- ----- ----- ----- -----
Income (loss) from
operations........... (7.8) 10.7 5.0 5.1 16.2
Interest income....... 1.2 0.7 1.4 1.5 2.2
Other expense......... (1.7) (0.2) (0.6) (.8) (.4)
----- ----- ----- ----- -----
Income (loss) before
income taxes........... (8.3) 11.2 5.8 5.8 18.0
Provision (benefit) for
income taxes........... (1.2) 3.4 1.5 1.7 5.1
----- ----- ----- ----- -----
Net income (loss)....... (7.1)% 7.8% 4.3% 4.1% 12.9%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED MARCH 30, 1996 COMPARED TO SIX MONTHS ENDED MARCH 25, 1995
Revenues. Total revenues for the first six months fiscal 1996 increased 74%
to $33,520,701 from $19,229,974 for the first six months of fiscal 1995. This
increase was primarily due to the increase in the total number of DXA bone
densitometer product shipments in both Hologic's domestic and international
markets, particularly in the United States where product sales for the first
six months of fiscal 1996 increased 600% over the prior year. There was also a
shift in product sales mix to Hologic's new line of bone densitometers, the
ACCLAIM series, which Hologic 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 second quarter of fiscal 1996, sales
of the ACCLAIM product accounted for over 93% of product sales. Other revenues
also increased due to increases in revenue relating to medical data management
services provided to pharmaceutical companies to assist in the collection and
monitoring of clinical trial data.
In the first six months of fiscal 1996, approximately 44% of product sales
were generated in the United States, 27% in Asia, 23% in Europe, and 6% in
other international markets. In the first six months of fiscal 1995,
approximately 12% of product sales were generated in the United States, 41% in
Asia, 40% in Europe and 7% in other international markets.
Hologic 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
65
<PAGE>
$124, effective January 1, 1995, from $68, the original recommended
reimbursement rate which went into effect in April 1994.
Costs and Expenses. The cost of product sales decreased as a percentage of
product sales to 47% in the first six months of fiscal 1996 from 56% in the
first six months of fiscal 1995. In the first six months of fiscal 1996, these
costs decreased as a percentage of product sales primarily due to increasing
shipments of Hologic's new family of DXA bone densitometers, the ACCLAIM
series, a volume increase in the number of DXA systems sold resulting in
certain manufacturing efficiencies, and an increase in sales by Hologic's
direct sales force (primarily in the United States) which results in higher
selling prices. Hologic 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.
Research and development expenses increased 48% to $3,076,899 (9% of total
revenues) in the first six months of fiscal 1996 from $2,076,566 (11% of total
revenues) for the first six months of fiscal 1995. The increase in research
and development expenses in the fiscal 1996 period was primarily due to the
addition of engineering personnel and outside consultants working on the
development of new products. As a percentage of total revenues, research and
development expenses declined in the first six months of fiscal 1996,
reflecting increased revenues during that period.
Selling and marketing expenses increased 63% to $5,758,126 (18% of product
sales) in the first six months of 1996 from $3,534,468 (19% of product sales)
in the first six months of fiscal 1995. The increase in selling and marketing
expenses in the fiscal 1996 period was primarily due to an increase in sales
personnel and related expenses, marketing and promotional costs incurred in
connection with the introduction of the ACCLAIM series and increased sales
commissions based on the higher sales volume. In addition, Hologic incurred
additional costs in connection with its strategic alliances for the
development of new products and the distribution of products through new sales
channels.
General and administrative expenses increased 59% to $3,250,551 (10% of
total revenues) in the first six months of fiscal 1996 from $2,039,807 (11% of
total revenues) in the first six months of fiscal 1995. The increase in
general and administrative expenses in the fiscal 1996 period were primarily
due to increased headcount and other compensation-related expenditures, and an
increase in accounts receivable reserves, which reflects the increase in
accounts receivable.
Litigation expenses incurred in the first six months of fiscal 1996 and in
fiscal 1995 were in connection with Hologic'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 Hologic and Lunar. The complaint brought by Oldelft against
Hologic was dismissed in December 1995. In January 1996, Oldelft filed a
motion for reconsideration of the dismissal and amended its complaint. In
April 1996, the Court denied Oldelft its motion for reconsideration of the
dismissal, and in May 1996 Hologic and Oldelft settled this matter.
Interest Income. Interest income increased to $749,245 in the first six
months of fiscal 1996 from $282,571 in the comparable period in fiscal 1995 as
Hologic earned a higher rate of return on a higher investment base than in the
prior year. In January 1996, Hologic received proceeds of approximately
$49,300,000 from a public sale of Common Stock which increased the investment
base. Hologic has invested these proceeds in investment grade corporate and
government securities. In fiscal 1996, Hologic has also increased the number
of long-term receivables to Latin American customers which generates
additional interest income.
Other Expense. In the first six months of fiscal 1996, Hologic incurred
other expenses of $123,763. These expenses were slightly less than other
expenses incurred in the comparable period of fiscal 1995 and were primarily
attributable to the interest costs on the line of credit established by
Hologic in the third quarter of fiscal
66
<PAGE>
1994 and, to a lesser extent, foreign currency exchange losses arising from
Hologic's U.S. dollar denominated sales transactions to its European
subsidiaries. Hologic's European subsidiaries utilize the line of credit to
borrow funds in their local currencies to pay for all intercompany sales,
thereby reducing the foreign currency exposure on those transactions. To the
extent that foreign currency exchange rates fluctuate in the future, Hologic
may be exposed to continued financial risk. Although Hologic 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 Hologic will be successful
or can fully hedge its foreign currency exposure.
Provision for Income Taxes. Hologic's effective tax rate for the first six
months of fiscal 1996 was 28.4%. Hologic'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 Hologic's foreign sales corporation. Hologic's effective tax
rate may increase for the remainder of fiscal 1996 depending on the mix of
U.S. versus international income and the availability of tax credits.
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 Hologic'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 Hologic's new line of bone densitometers, the ACCLAIM
series, which Hologic 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 Hologic's domestic and international
markets, particularly Japan where Hologic'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 Hologic began to sell as a
distributor, primarily in Europe.
Other revenues consist of royalty revenues from Hologic'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.
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.
Hologic expects that foreign sales in the current fiscal year will continue to
account for a substantial portion of product 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 Hologic 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. Hologic
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
67
<PAGE>
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 Hologic 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 Hologic'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 Hologic sells directly to end-user
customers. In addition, Hologic incurred additional costs in connection with
its initiation of a formal new business development effort, which has resulted
in Hologic'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
Hologic'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 involving DXA and ultrasound technologies for a period of ten years was
reached by Hologic and Lunar. The complaint brought by Oldelft against Hologic
was dismissed in December 1995.
In the fourth quarter of fiscal 1993, Hologic 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 Hologic's desire
to reallocate its resources to expanding territories with greater growth
potential. At the end of fiscal 1994, Hologic'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 Hologic 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 Hologic earned a
slightly higher rate of return on a slightly lower investment base than in the
preceding year.
68
<PAGE>
Other Expense. In fiscal 1995 and 1994, Hologic 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 Hologic in the third
quarter of fiscal 1994 for use by Hologic'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, Hologic recognized other expenses of $440,000 which
primarily represented foreign currency exchange losses, net of hedge
transactions, arising from Hologic'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
Hologic'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 Hologic to recognize a transaction loss.
To the extent that foreign currency exchange rates fluctuate in the future,
Hologic may be exposed to continued financial risk. Although Hologic 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 Hologic
will be successful or can fully hedge its outstanding exposure.
Provision for Income Taxes. Hologic's effective tax rate was 25.8% in fiscal
1995 and 30.8% in fiscal 1994. In fiscal 1993, Hologic had a benefit for
income taxes as a result of that year's loss. Hologic'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 Hologic's foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Hologic has funded its operations primarily through cash flows from
operations and the issuance of securities.
At March 30, 1996, Hologic's working capital was $74,559,246. At such date,
Hologic had $62,016,180 in cash, cash equivalents and short-term investments.
The cash, cash equivalents and investments balance increased approximately
$52,076,000 from September 30, 1995 primarily due to the net proceeds of
approximately $49,300,000 from the public offering of common stock in the
second quarter. In addition, the cash and investments balance increased
approximately $2,776,000 primarily due to the proceeds and tax benefits from
the exercise of stock options and an increase in Hologic's current
liabilities, which were partially offset by an increase in accounts
receivable. The increase in current liabilities and accounts receivable
reflects Hologic's introduction of its new ACCLAIM family of bone
densitometers and the increase in sales activity. At March 30, 1996, one
customer had accounts receivable outstanding of approximately $3,355,000,
which were current within their payment terms. Hologic finances certain sales
to Latin America over a two to three year time frame. At March 30, 1996,
Hologic had long-term accounts receivable outstanding of approximately
$942,000 relating to these sales, which were included in other assets. In the
first six months of fiscal 1996, Hologic purchased approximately $686,000 of
property and equipment, primarily computers and other equipment associated
with the hiring of additional personnel.
Hologic and FluoroScan estimate that they will incur direct transaction
costs of approximately $1.8 million associated with the Merger. These
transactions costs will be expensed in the period incurred under the pooling-
of-interests method of accounting for business combinations. As a result, the
earnings of the combined entity will be adversely affected. This amount is a
preliminary estimate only and therefore subject to change. There can be no
assurance that Hologic and FluoroScan will not incur additional charges to
reflect costs associated with the Merger.
Hologic does not currently have any significant capital commitments and
believes that existing sources of liquidity, including the anticipated net
proceeds of the proposed 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 Hologic's anticipated working
capital and other cash needs for the foreseeable future.
69
<PAGE>
INFORMATION REGARDING FLUOROSCAN
GENERAL
FluoroScan manufactures and distributes the FluoroScan Imaging System (the
"FluoroScan System"), a low intensity, real time X-ray imaging device which
provides high resolution images at radiation levels and at a cost well below
those of conventional X-ray and fluoroscopic equipment. The FluoroScan System
technology is based on a micro channel plate image intensifier commonly known
as a "night vision" intensifier. This technology permits the FluoroScan System
to produce high resolution images using only a small amount of radiation that
is converted to visible light and amplified approximately 50,000 times. In
this manner, the FluoroScan System provides both still X-ray pictures and real
time images similar to those produced by a video camera, permitting users to
view, for example, the movement of bones in a flexing hand as well as the
placement of bones in a still extremity or the circuitry inside a computer.
FluoroScan believes it has the largest installed base of mini C-arms in the
medical device market. FluoroScan currently sells different models of the
FluoroScan System and certain related products to various customers including
major university hospitals, clinics and orthopedic surgeons.
BACKGROUND
FluoroScan was incorporated in Delaware in 1984 under the name HealthMate,
Inc. ("HealthMate"), as the successor to HealthMate of Illinois, Inc. and
Lixiscope of America, Inc., which were incorporated in Illinois in 1982 and
1981, respectively. In 1984 and 1985, HealthMate entered into two exclusive
license agreements with NASA for certain patents and developed the underlying
technology into the current FluoroScan Imaging System. See "Information
Regarding FluoroScan--Licenses and Other Proprietary Information," below.
HealthMate completed a $3.5 million initial public offering in 1985.
Offering proceeds were used to market the FluoroScan System and for continued
research and development of the exclusively licensed technology. Mr. Grossman,
one of HealthMate's founders, left HealthMate in 1986 due to a disagreement
with certain members of the Board of Directors as to the future direction of
FluoroScan and resigned as a director in 1987. Mr. Issette, who had joined
HealthMate in 1984 as a director, also resigned in 1987. HealthMate's business
experienced a significant downturn following Mr. Grossman's departure. In
March 1989, Messrs. Grossman and Issette returned to HealthMate and caused
HealthMate to file a Chapter 11 petition for protection under the United
States Bankruptcy Code. Messrs. Grossman and Issette also reorganized
HealthMate into a privately-held company, after making equity contributions of
$100,000 each in connection with the reorganization plan. The reorganization
plan was confirmed in June 1991 and closed in September 1991. In 1991,
HealthMate changed its name to "FluoroScan Imaging Systems, Inc." and
FluoroScan made the final payment in respect of its remaining obligations to
creditors in April 1994.
In July 1994, FluoroScan completed a public offering of FluoroScan Units
which netted FluoroScan $3.087 million. Each Unit consisted of one share of
FluoroScan Common Stock and one FluoroScan Redeemable Common Stock Warrant. In
August 1994 FluoroScan received an additional $913,000 in proceeds from the
exercise of an over allotment option granted to the underwriter.
In November 1995, FluoroScan International, Inc. was incorporated as a
wholly-owned subsidiary of FluoroScan.
THE FLUOROSCAN TECHNOLOGY
The basis of the FluoroScan System technology is a second generation micro
channel plate image intensifier commonly referred to as a "night vision"
intensifier. This technology permits the FluoroScan System to produce high
resolution readily viewable images by using a small amount of radiation,
converting it to visible light and amplifying it approximately 50,000 times.
The same night vision intensifier, as used by the military, allows clear views
of a battlefield at night by amplifying small amounts of ambient light.
70
<PAGE>
The FluoroScan System technology offers several advantages over existing
real time X-ray imaging devices (also known as C-arms, image intensifiers or
fluoroscopy equipment). These advantages include:
(1) Substantial reduction of radiation to the patient and of scatter
radiation to the surgeon and other operating room personnel. FluoroScan
estimates that the FluoroScan System reduces radiation exposure by
approximately 90% as compared to a conventional C-arm imaging device, based
on testing conducted by independent health physicists. Because of this
reduction, FluoroScan has received waivers from the legal requirement
imposed by many states that persons in a room with an operating X-ray
device must wear lead aprons. FluoroScan is not aware of any other X-ray
device which has received such waivers.
(2) The FluoroScan System costs approximately one-third of the cost of a
conventional C-arm, although the relevant health care codes for
reimbursement are the same for the FluoroScan System and conventional
fluoroscopy equipment. Thus, users in the health care field are able to
recover the cost of purchasing the FluoroScan System more quickly and with
fewer procedures.
(3) The FluoroScan System is mobile, does not require lead-lined rooms
and can often be operated without a radiology technician. Users of the
FluoroScan System can move the unit easily from room to room, thereby
saving space and money.
(4) The FluoroScan System does not require the regular service and tube
replacement required by conventional C-arms. The FluoroScan System operates
with micro amperage current instead of the milli amperage current used by
conventional equipment, and a typical setting ranging from 25 to 99
microamps rather than the typical 3,000 microamps (three milliamps) for
conventional equipment. For these reasons, the FluoroScan System can be
operated continuously without overheating, while conventional equipment can
require frequent and lengthy cooling-off periods or internal cooling
devices, and FluoroScan's X-ray tube has a longer life than conventional
equipment. In addition, the X-ray tube replacement cost for a FluoroScan
System is approximately $5,000, which is substantially less than the cost
to replace an X-ray tube in a conventional C-arm.
THE MARKET
Medical Applications
Approximately 98% of FluoroScan's sales are to healthcare customers. The
FluoroScan System is used in the healthcare field primarily for extremity
imaging to assist with various minimally invasive surgical procedures and to
detect fractures and foreign objects. Historically, FluoroScan has sold the
FluoroScan system primarily to hospitals and ambulatory surgery centers for
use by orthopedic surgeons in the operating room, and to a lesser extent, for
other medical uses.
FluoroScan believes that certain trends in the healthcare industry will
enable the company to broaden its FluoroScan sales from these hospitals and
surgery centers to private orthopedic and podiatric physician groups. Some of
these trends include:
. the emergence of technology that enables minimally invasive procedures
and therapies;
. the increase in the number of office-based procedures and examinations
as a result of efforts to contain healthcare costs; and
. the development of new treatments and pharmaceuticals such as synthetic
bone materials that are facilited by the use of a mini C-arm to perform
these procedures.
Other Applications
FluoroScan has also sold the FluoroScan System for industrial use. It is
used in various industries for quality control, inspection of parts and other
imaging requirements.
71
<PAGE>
THE FLUOROSCAN MODELS AND RELATED PRODUCTS
FluoroScan currently sells different models of FluoroScan System units,
accessory supply items, service and extended service contracts.
FluoroScan III. The FluoroScan III imaging system was introduced in the
fourth quarter of 1995. The FluoroScan III typically has a four- or five-inch
field-of-view and is targeted primarily at orthopedic surgeons, operating
rooms, emergency rooms and ambulatory surgery centers. The new system replaced
FluoroScan I (the first generation model FluoroScan System) and has a number
of technical enhancements. FluoroScan III has dual video channels that allow a
surgeon to display different views of the anatomy for side-by-side comparison.
The unit also features four image buffer memories for instant recall of
previous images. The unit also provides for permanent storage of up to 4,000
full resolution digital images.
The unit stands approximately four feet high, weighs about 240 pounds and
can be plugged into any standard outlet. It rests on a portable, wheeled base
cabinet, and all vital functions are computer controlled. Images can be viewed
on the monitor or, through the addition of options, printed on thermal paper
or stored on video tape or computer diskette.
FluoroScan II. FluoroScan has introduced the FluoroScan II to veterinarians
and has exhibited a prototype of the FluoroScan II to orthopedic surgeons for
use in their offices and to other medical and veterinary offices, podiatrists
and sports medicine physicians as well as for use by the military and various
industries. FluoroScan believes that the target audience for the three-inch
field-of-view FluoroScan II consists of users seeking a lower cost or more
mobile unit than the FluoroScan III. FluoroScan manufactures two versions of
the FluoroScan II for the veterinary and medical markets. The veterinary
version differs from the medical version of the FluoroScan II in that it is
contained in a portable carrying case with a removable C-arm, which may be
hand held. FluoroScan began sales of the veterinary version of this item in
the third quarter 1995. FluoroScan expects to begin sales of the medical
version of the FluoroScan II in the first quarter of 1997.
Future Models. FluoroScan is now developing another model which will permit
imaging of larger areas, such as adult hips and spines. These applications are
currently being served mainly with conventional high-radiation imaging
products. See "Information Regarding FluoroScan--Research and Development,"
below.
OTHER PRODUCTS AND SERVICES
In addition to FluoroScan System models, FluoroScan also sells accessory
items and options such as custom designed sterile drapes, thermal printer
paper, video cassette recorders, and video printers. The drapes are required
in the operating room for each procedure performed in order to maintain a
sterile field. In addition, thermal printer paper is sold for use with a video
printer. This printer permits users to produce a hard copy picture of the
FluoroScan System image. Sales of accessory items and options have increased
with increased FluoroScan System sales, and FluoroScan expects this trend to
continue. FluoroScan also derives revenues from service sales and the sale of
extended maintenance agreements. Sales of accessories, options and service
currently account for approximately 7% of sales annually.
SALES AND MARKETING
FluoroScan markets and sells the FluoroScan System and related products in
the United States health care market through its employees and a national
network of independent sales representatives and sales representative
organizations. Products are marketed and sold to non-health care customers in
the United States through one independent industrial sales representative. All
of these sales representatives are paid, on a commission basis, after the
customer has paid for the purchased FluoroScan System unit. Sales
representatives generally earn commissions equal to 20% of net sales. All
medical sales representatives have been granted exclusive territories and are
required to meet specified sales quotas.
Domestic marketing efforts are centered on trade show appearances, direct
mailing of promotional videos, product brochures, and print advertising in
trade journals. FluoroScan representatives currently attend in excess
72
<PAGE>
of 100 trade shows and laboratory exhibitions per year and FluoroScan
currently mails in excess of 200 videos per month. FluoroScan plans to expand
its efforts in print advertising, direct mailings, and trade show appearances.
To promote expansion of its international business, FluoroScan established a
wholly-owned subsidiary in November 1995, FluoroScan International Inc., which
operates a branch in Paris, France. FluoroScan markets, sells and services its
products internationally through independent distributors who purchase units
from FluoroScan for resale to their customers. There are currently
international distributors selling FluoroScan's products in Australia,
Austria, Belgium, Canada, Finland, France, Holland, Germany, Hong Kong,
Iceland, Italy, Korea, Luxembourg, Norway, Sweden, Switzerland and the United
Kingdom. In 1995, international sales comprised approximately 8% of
FluoroScan's total annual sales. Management expects such sales to continue to
grow as the FluoroScan System receives certain variances and allowances to
sell in foreign countries and because of its ongoing establishment of foreign
distribution networks.
CORPORATE COLLABORATIONS
Norian Corporation. On June 12, 1995, FluoroScan announced that it had
entered into a worldwide exclusive partnership agreement with Norian
Corporation ("Norian"), based in Cupertino, CA. The agreement provides for
FluoroScan to provide imaging equipment for seminars introducing Norian's
Skeletal Repair System(TM) ("SRS") to orthopedic surgeons.
Norian is in clinical trials in the U.S. and Europe for SRS. SRS is a
material that is injected into a fracture and has been shown to hold the bones
in position while providing the raw materials to help the body repair itself
more rapidly. Since SRS requires extensive imaging from the initial injection
through the healing process, FluoroScan believes that FDA approval and market
acceptance of SRS could provide long-term benefits for FluoroScan. There can
be no assurance that SRS will receive FDA approval, or if approved will gain
wide market acceptance or enhance sales of FluoroScan's products.
Picker International. On June 4, 1996, FluoroScan announced that it had
signed a renewable one year agreement with Picker International ("Picker") to
provide on-site, same day nationwide servicing of FluoroScan equipment to
FluoroScan customers in the United States. Picker also serves as FluoroScan's
distributor in Canada.
MANUFACTURING AND SUPPLIERS
FluoroScan manufactures all FluoroScan System models and related products at
its manufacturing facility in Northbrook, Illinois. Current manufacturing
capacity permits the production of approximately 30 units per month.
Generally, units for use in the health care field are manufactured without a
prior order, while units for use in industrial applications are custom made to
the customer's specifications.
FluoroScan manufactures all of the FluoroScan System's components from raw
materials, with the exception of the X-ray tube, fiberoptic taper, night
vision intensifier, video monitor and camera. All of the raw materials and
most of the purchased components used in manufacturing FluoroScan's products
are readily available from numerous sources. Several key components require
high technology and are manufactured by only one or a small number of
suppliers, including Incom Inc., Kevex X-Ray, Inc., Litton Inc., and Schott
Fiber Optics Inc.
Although FluoroScan uses materials in its manufacturing process that may be
subject to federal, state and/or local environmental laws, the costs and
effects of compliance with these laws have not had a material effect on
FluoroScan's financial condition or results of operations during any of the
past three years.
73
<PAGE>
COMPETITION
FluoroScan is the exclusive licensee for the FluoroScan System technology in
the United States. FluoroScan's known direct competitor in the manufacture of
the mini C-arm imaging systems is Xi Tec, which has manufactured a comparable
system pursuant to a sublicense from FluoroScan. Other direct competitors
include OEC Medical and Lunar, each of which manufactures a small conventional
C-arm imaging system that does not use FluoroScan's patented technology and
Lixi, which manufactures an X-ray tube version, Lixiscope, only for the
industrial marketplace. FluoroScan believes that Lixi's products have
infringed on one of the three patents originally licensed by FluoroScan from
NASA and has so notified NASA. This patent expires in July 1997, and as a
consequence, some of FluoroScan's competitors may then attempt to utilize this
technology. See "Information Regarding FluoroScan--Licenses and Other
Proprietary Information."
Although it has no other direct competition, FluoroScan competes indirectly
with manufacturers of conventional C-arms, including Siemens A.G., General
Electric Company, Fischer Imaging Corporation, OEC Medical Inc., Philips N.V.
and Picker. These competitors have substantially greater financial and
marketing resources than FluoroScan.
Both direct and indirect competition is based largely on price, quality,
service and production capabilities. FluoroScan believes it is well positioned
to compete effectively due to the FluoroScan System's significantly lower
levels of radiation and its cost, mobility, quality and durability. See
"Information Regarding FluoroScan--The FluoroScan Models and Related
Products."
LICENSES AND OTHER PROPRIETARY INFORMATION
FluoroScan has two license agreements with the United States government as
represented by NASA that are exclusive within the United States. The first
agreement gives FluoroScan exclusive rights to manufacture and distribute a
nonradioactive isotope version of NASA's low intensity X-ray and gamma ray
imaging device (patent no. 4,142,101). This technology provides the ability to
amplify X-rays that have been converted to visible light. This license
agreement and underlying patent previously had an expiration date of February
1996 but was extended as a result of GATT and now expires in July 1997. The
second agreement gives FluoroScan exclusive rights to manufacture and
distribute NASA's high voltage isolation transformer (patent no. 4,510,476)
and high voltage power supply (patent no. 4,517,472). This technology allows
FluoroScan products to produce low levels of radiation. This second license
and underlying patent previously had an expiration date of 2002 but was
extended as a result of GATT and now expires 2003. All three of these patents
are incorporated into FluoroScan technology. Pursuant to the licenses,
FluoroScan may be required to grant sublicenses to the extent that NASA
believes such sublicenses are necessary for the health and safety needs of the
United States and such needs cannot be fulfilled by FluoroScan. FluoroScan
must pay NASA royalties equal to 4.5% of the portion of the selling price of
each FluoroScan System that incorporates all of the licensed technology
attributable to NASA's patents. In the event FluoroScan sells a FluoroScan
System utilizing the technology covered by only the high voltage power supply
and high voltage isolation transformer patent, the royalty payment is reduced
to 3.5% of the patented portion of the selling price. Sales of products to the
United States government carry no royalty obligation, but the selling price of
such products must be reduced in an amount equal to the royalty that would
otherwise have been payable.
Under an exclusive, perpetual consulting agreement with QTR Corporation
("QTR"), whose principals are the inventors of the technology underlying the
NASA patents, QTR provided certain technical expertise and assistance to
FluoroScan. In the past, FluoroScan paid QTR $300 per FluoroScan System sold
that utilized QTR's developments. FluoroScan incurred and paid royalties to
QTR of $37,200 and $44,400 in 1993, and 1994, respectively, pursuant to such
agreement. During the 1994 year, FluoroScan began to utilize alternative
technology and ceased payments to QTR Corporation.
Both NASA license agreements allow FluoroScan to call to NASA's attention
any incidents of infringement and to suspend royalty payments if NASA does not
bring suit against the alleged infringer within six months. At such time as
the infringement is determined to have ended, the license agreements require
FluoroScan to pay the royalties previously suspended, offset by FluoroScan's
legal and other expenses incurred in prosecuting such infringement claims
minus any recoveries from infringement claims.
74
<PAGE>
In 1992, FluoroScan and the U.S. Department of Justice representing NASA
brought suit against Dow Corning Wright and Xi Tec for alleged infringement of
the NASA low intensity X-ray and gamma ray imaging device patent. In 1993, the
parties agreed to settle the litigation. As part of the settlement, the
defendants agreed to pay to FluoroScan a lump sum of $250,000 plus two
subsequent payments of $50,000 each. These payments were used by FluoroScan to
offset its litigation and other expenses and to pay NASA $50,000, representing
NASA's share of such settlement. In addition, FluoroScan granted Xi Tec a
nonexclusive, nonassignable and nontransferable sublicense under the NASA
license covering the X-ray and gamma ray imaging device patent which patent
previously had an expiration date of February 26, 1996 and was extended as a
result of GATT to July 1997. Under the sublicense, Xi Tec is obligated to pay
royalties to FluoroScan of $1,375 per covered device sold by Xi Tec during the
first 12 months of the license, $1,675 per covered device for the next 300
devices Xi Tec sells, and $1,375 per covered device sold thereafter through
the expiration date. From the royalties to be paid by Xi Tec to FluoroScan,
FluoroScan is obligated to pay $250 per device to NASA. In 1993, 1994 and
1995, Xi Tec incurred and paid royalties to FluoroScan of approximately
$97,625, $154,100 and $204,350, respectively, for sales of licensed products
reported by Xi Tec to FluoroScan. Of these royalties, FluoroScan incurred and
paid royalties of $17,750, $25,500 and $28,000 for 1993, 1994 and 1995,
respectively, to NASA.
As the result of the alleged infringement, FluoroScan incurred legal and
other expenses of approximately $243,000 during 1993 and 1992. From 1987
through 1991, FluoroScan suspended royalty payments to NASA of $168,000.
Suspended royalties in 1992 and 1993 totaled approximately $105,000 and
$95,000, respectively.
FluoroScan has also notified NASA that Lixi, may be infringing on the X-ray
and gamma ray imaging device patent. Lixi sells X-ray tube version lixiscopes
only in the industrial marketplace, to which FluoroScan makes sales
representing approximately 2% of total sales. On July 1, 1994, FluoroScan and
NASA entered into a settlement agreement relating to previously suspended
royalties. Pursuant to the terms of the settlement agreement, FluoroScan paid
NASA approximately $79,500 in respect of all suspended royalties through March
28, 1994 and agreed to pay 50% of royalties incurred after March 28, 1994,
with the remaining 50% payable either when the alleged Lixi infringement
ceases, when NASA sues Lixi or when the license covering the X-ray and gamma
ray imaging device patent expires. As a result of the settlement agreement,
FluoroScan realized a settlement gain of approximately $287,900 during the
third quarter of 1994. Suspended royalties as of December 31, 1994 and 1995
totaled $42,590 and $58,880, respectively.
In addition to the patented NASA technology, FluoroScan considers certain of
its processes, design developments and improvements to be proprietary trade
secrets. FluoroScan may apply for patents on certain design developments in
the future.
GOVERNMENT REGULATION
FluoroScan is required to obtain certain clearances, acceptances to market
and variances from the FDA to sell the FluoroScan System in the United States
health care market. The requisite clearances, acceptances to market and
variances have been obtained for the FluoroScan System. Variances are granted
for five-year periods and are renewable for an unlimited number of five-year
periods. FluoroScan's current variance expires April 12, 2000. Any new models
could, however, require additional clearances, acceptances to market and
variances. In addition to the FDA requirements, various states also impose
regulations on X-ray and fluoroscopic equipment. Management believes
FluoroScan has complied or received waivers from compliance with all such
regulations for FluoroScan products currently sold and in use. FluoroScan is
also subject to various ongoing reporting and other compliance requirements.
FluoroScan may also be subject to certain state disclosure and other laws
that could be interpreted to impose certain restrictions on FluoroScan's
relationships with its independent sales representatives, including
restrictions on FluoroScan's ability to terminate such representatives without
advance notice and, in some cases, without cause. In 1994, FluoroScan settled
a lawsuit filed by a former sales representative who alleged, among other
things, failure to comply with such state laws. Such settlement is not
material to FluoroScan's financial condition or results of operations.
75
<PAGE>
RESEARCH AND DEVELOPMENT
For the years ended December 31, 1993, 1994 and 1995 research and
development expenditures amounted to $298,530, $213,462 and $306,110,
respectively. Such expenditures to date have focused on mechanical, electrical
and software engineering, as well as design and aesthetic improvements to the
FluoroScan System. In 1995, FluoroScan introduced the new hospital model
FluoroScan System III, which FluoroScan believes has become the industry
standard. Management expects to spend significant amounts on research and
development activities in subsequent years and to focus such activities on new
product development, expansion of applications for current products and
continued streamlining of manufacturing processes.
EMPLOYEES
As of June 30, 1996, FluoroScan had 35 full-time employees; it occasionally
uses the services of temporary workers as well. FluoroScan considers its
employee relations to be good. None of FluoroScan's employees are represented
by a union.
PROPERTY
FluoroScan's executive offices and manufacturing facilities have been
located at 650-B Anthony Trail, Northbrook, Illinois, since 1988. These
facilities, which consist of approximately 13,500 square feet of space, are
leased by FluoroScan pursuant to a lease which expires in February 1997.
Rental expense was $74,289, $78,750, and $103,933 for 1993, 1994, and 1995,
respectively. Under the terms of the lease, FluoroScan is also obligated to
pay its pro rata share of the annual real estate taxes and certain operating
expenses in excess of specified amounts. These additional payments were
approximately $5,200, $5,900 and $7,000 in 1993, 1994 and 1995, respectively.
Of the leased space, approximately 6,250 square feet are used for
manufacturing, production and storage purposes, and approximately 7,250 square
feet are used for offices. FluoroScan is currently in negotiations to lease
additional space contiguous to its existing facility, which Management
believes would be sufficient to accommodate anticipated growth for the
foreseeable future.
In 1995, FluoroScan International, Inc. entered into a three-year lease
agreement for an office facility in Paris, France. The agreement expires in
November, 1998, and has two three-year options to extend the lease,
exercisable at FluoroScan's discretion. Lease terms specify an annual rental
amount of FF199,250 (approximately $40,000) plus building maintenance charges.
LEGAL PROCEEDINGS
FluoroScan is not presently involved in any legal proceedings which, if not
settled in favor of FluoroScan, would have a material adverse effect on its
financial condition.
76
<PAGE>
FLUOROSCAN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
For the three and six months ended June 30, 1996, FluroScan Imaging Systems,
Inc. reported net sales of $3,402,698 and $6,904,732, respectively, as
compared with net sales of $3,573,737 and $6,064,659 for the same periods
ended June 30, 1995. FluroScan Imaging Systems, Inc. also reported net income
for the three and six months ended June 30, 1996 of $165,794, or $0.05 per
share and $569,405 $0.16 per share, respectively, as compared with $417,689,
or $0.12 per share, and $758,311, or $0.22 per share, for the corresponding
periods ended June 30, 1995. See "Risk Factors."
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales represented by
selected items in FluoroScan's consolidated statements of income for the years
ended December 31, 1993, 1994 and 1995 and the three months ended March 31,
1995 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31
------------------------- --------------------
1993 1994 1995 1995 1996
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.......... 39.4 39.9 41.5 41.7 43.0
------- ------- ------- --------- ---------
Gross profit................ 60.6 60.1 58.5 58.3 57.0
Selling, general and
administrative expenses.... 50.5 40.6 44.4 40.9 40.3
------- ------- ------- --------- ---------
Operating income............ 10.1 19.5 14.1 17.4 16.7
Net other income............ 3.9 3.0 3.7 4.3 2.7
------- ------- ------- --------- ---------
Income before income taxes.. 14.0 22.5 17.8 21.7 19.4
Income taxes (benefit)...... (7.0) 3.2 6.6 8.0 7.8
------- ------- ------- --------- ---------
Net income.................. 21.0% 19.3% 11.2% 13.7% 11.6%
======= ======= ======= ========= =========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
Net sales for the three months ended March 31, 1996 were $3,502,034 compared
with $2,490,922 for the three months ended March 31, 1995, an increase of
$1,011,112 or 40.6%. This increase was due primarily to increased sales of
four- and five-inch field-of-view FluoroScan Systems. This was partially
offset by the decline in sales of the three-inch field-of-view units.
FluoroScan believes that this was a result of a shift in market preference
toward four- and five-inch field of view FluoroScan System units, even though
these units are sold at higher unit prices. During the period ended March 31,
1996, FluoroScan also ceased production of the FluoroScan System I model,
which was replaced by the FluoroScan System III model in fourth quarter 1995.
The FluoroScan System III model is distinguished from earlier models in that
it has dual video and permanent image storage capabilities. The remaining
inventory of FluoroScan System I models was sold in first quarter 1996.
FluoroScan's gross profit increased $542,954 or 37.4% for the three month
period ended March 31, 1996, as compared to the same period of 1995. Gross
profit as a percentage of net sales was 57.0% for the first three months of
1996, compared to 58.3% in the comparable period of 1995. This decrease
occurred primarily as a result of a greater percentage of four- and five-inch
field of view units in FluoroScan's sales mix. Although higher net sales and
gross profit are realized on such units, gross profit as a percentage of sales
was slightly lower than on the three-inch field of view units. Also
contributing to the gross profit percentage decline were lower margins on the
newly introduced FluoroScan System III model (which is slightly more expensive
to produce), relative to the FluoroScan System I model which it replaced.
Selling, general and administrative expenses in the first three months of
1996 were $1,412,315 or 40.3% of net sales, compared with $1,020,377 or 40.9%
of net sales in the comparable period in 1995. This increase was primarily
attributable to higher commission expense, compensation costs, advertising and
tradeshow expenditures, as well as costs associated with FluoroScan's new
branch in France, which was opened in November 1994.
77
<PAGE>
FluoroScan's other income was $94,108 for the three months ended March 31,
1996, compared to $106,335 for the three months ended March 31, 1995, a
decrease of $12,227. This was primarily due to the expiration in February 1996
of a sublicense agreement under which FluoroScan previously had been recording
royalty income.
Net income was $403,611 or $0.12 per share for the three months ended March
31, 1996, based on weighted average common shares outstanding of 3,495,417.
This represented an 18.5% increase in net income from the comparable 1995
period amount of $340,622 or $0.10 per share based on weighted average common
shares and share equivalents outstanding of 3,506,538.
YEARS ENDED DECEMBER 31, 1994 AND 1995
FluoroScan's net sales for 1995 were $13,146,979, compared with $9,170,505
for 1994, an increase of $3,976,474 or 43.4%. This increase was generated from
several sources. Most of the increase can be attributed to sales of four- and
five-inch field-of-view FluoroScan System I units, which more than tripled
from 1994 levels. Such units were first introduced in June 1994. Sales of the
FluoroScan System II veterinary units, which FluoroScan began selling in
August 1994, more than doubled in 1995. Net sales in 1995 also benefited from
the February introduction of FluoroScan's new generation VGA video enhancement
system and the new FluoroScan System III model, which FluoroScan began selling
in November 1995. These increases in 1995 were partially offset by the decline
in sales of the three-inch field-of-view units. Management believes that this
was a result of a shift in market preference toward four- and five-inch field-
of-view FluoroScan System units, even though these are sold at higher unit
prices.
FluoroScan's gross profit increased $2,175,096 or 39.4% in 1995, compared
with the prior year. FluoroScan's gross profit as a percentage of net sales
was 58.5% for 1995, compared with 60.1% in 1994. The decrease occurred
primarily as a result of a greater percentage of four- and five-inch field-of-
view units in FluoroScan's sales mix. Although higher net sales and gross
profit are realized on such units, gross profit as a percentage of sales was
slightly lower than on the three-inch field-of-view units.
Selling, general and administrative expense for 1995 was $5,832,622 or 44.4%
of net sales, compared with $3,720,521 or 40.6% of net sales in 1994. This
increase was primarily attributable to new product introduction costs and
higher commission expense, compensation costs, investor relations expense and
royalty expense. In the third quarter of 1994, FluoroScan entered into an
agreement with NASA with respect to suspended royalties. Accordingly, cash
flow was reduced, as was the balance sheet liability for royalties, by the
amount paid to NASA (approximately $79,500), and the excess of the balance
sheet liability over the amount so paid (approximately $287,900) was reported
as a reduction of selling, general and administrative expenses.
FluoroScan's other income was $485,409 for 1995 compared to $271,434 for the
prior year, an increase of $213,975. This was due primarily to an increase in
interest income and royalty income.
The income tax expense in 1994 of $292,000 was significantly affected by the
adjustment of the tax asset valuation allowance by $597,000. This allowance
was fully utilized as of December 31, 1994. FluoroScan incurred income tax
expense of $863,000 in 1995.
Net income was $1,478,737 or $0.43 per share for 1995, based on weighted
average common shares and share equivalents outstanding of 3,472,519. This
includes 715,216 shares issued in connection with FluoroScan's July 1994
initial public offering and weighted fully in the 1995 year. Net income
decreased 16.6% from the 1994 period income of $1,772,767 or $0.57 per share
based on weighted average common shares and share equivalents outstanding of
3,106,721. Net income was significantly impacted by the reduction of the tax
asset valuation allowance in 1994. Tax expense, net income and net income per
common share would have been $937,000, $1,404,737 and $0.40, respectively, for
1995 compared to $826,000, $1,238,860 and $0.40, respectively, for 1994 had
FluoroScan provided taxes at a combined statutory rate of 40% in 1994.
78
<PAGE>
YEARS ENDED DECEMBER 31, 1993 AND 1994
Net sales for 1994 were $9,170,505, compared with $6,927,761 for 1993, an
increase of $2,242,744 or 32.4%. The introduction of four- and five-inch
field-of-view FluoroScan System units, domestically and abroad, accounted for
90.8% of this increase. International sales, which increased 122.4% in 1994
over 1993, also contributed to the total year-to-year increase. Sales of
three-inch field-of-view units declined 4.5%. Management believes that this
was a result of a shift in market preference toward four-inch field-of-view
FluoroScan System units, which FluoroScan sells at higher unit prices.
FluoroScan's gross profit increased $1,318,629 or 31.4% for the year ended
December 31, 1994, compared to the year ended December 31, 1993. FluoroScan's
gross profit as a percentage of net sales declined from 60.6% in 1993 to 60.1%
in 1994. The decrease resulted from a greater percentage of international
sales in the sales mix, as well as lower margins on four- and five-inch field-
of-view FluoroScan System units. Sales to international distributors are
discounted, with no commission expense. Four- and five-inch field-of-view
FluoroScan System units were introduced in the second quarter of 1994 and were
priced for immediate market acceptance. Although FluoroScan realized higher
net sales and gross profit on such units, gross profit as a percentage of net
sales was slightly lower than on the three-inch field-of-view units.
Selling, general and administrative expense for 1994 was $3,720,521 or 40.6%
of net sales, compared with $3,493,466 or 50.5% of net sales in 1993.
Significant increases occurred in sales commissions, compensation costs, and
shipping and freight charges. These were partially offset by reductions in
research and development expenses and a benefit to FluoroScan resulting from
an agreement with NASA with respect to suspended royalties during the third
quarter of 1994. Accordingly, cash flow was reduced, as was the balance sheet
liability for royalties, by the amount paid to NASA (approximately $79,500),
and the excess (approximately $287,900) of the balance sheet liability over
the amount so paid was reported as income to FluoroScan.
In 1993, other income included $154,091 in patent litigation settlement
proceeds, net of litigation costs. In 1994, other income included a $106,783
increase in interest income over the 1993 amount.
FluoroScan had a tax loss carryforward from prior years equal to
approximately $673,300, which would have expired in specified amounts between
the years 2002 and 2004. Because FluoroScan is exempt from the Internal
Revenue Code Section 382 limitations on loss carryforwards, all of these
losses were deemed to be available. FluoroScan adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," effective January
1, 1992, but due to FluoroScan's then-recent bankruptcy the entire tax asset
was fully reserved as the valuation allowance. Because of FluoroScan's
increased profitability in 1994 and 1993, management determined that future
taxable income would likely be sufficient to adjust the valuation allowance
and realize the tax asset. The income tax expense in 1994 of $292,000 and the
income benefit in 1993 of $485,000 reflect the adjustment of the valuation
allowance by $597,000 and $897,000, respectively, as described in the notes to
consolidated financial statements.
Net income was $1,772,767 or $0.57 per share for 1994, based on weighted
average common shares and share equivalents outstanding of 3,106,721. This
represented a 21.6% increase over the net income for 1993 of $1,458,324 or
$0.52 per share, based on weighted average common shares and share equivalents
outstanding of 2,787,303.
The adjustment to the valuation allowance with respect to deferred tax
assets significantly affected FluoroScan's provision for taxes on income.
Since no valuation allowance remained at December 31, 1994, such adjustments
are not expected to continue. Tax expense, net income and net income per
common share would have been $826,000, $1,238,860 and $0.40, respectively, for
1994 compared to $389,000, $583,994 and $0.21, respectively, for 1993 had
FluoroScan provided taxes at a combined statutory rate of 40% in each of these
periods.
79
<PAGE>
Liquidity and Capital Resources
FluoroScan's working capital requirements have primarily related to its
level of sales. Working capital at March 31, 1996 was $8,248,456 representing
increase of $428,777 from December 31, 1995. This increase was primarily
attributable to higher accounts receivable which increased due to a higher
level of sales concentrated at the end of the quarter. This was, in part,
offset by increases in taxes payable. Cash used in operating activities
amounted to $97,653 for the three months ended March 31, 1996. In the
comparable period of 1995, cash provided by operating activities was $118,574.
The aforementioned increase in accounts receivable in the first quarter of
1996 was the primary reason for this difference.
FluoroScan currently has no long-term debt. As of December 31, 1994,
FluoroScan had a $300,000 line-of-credit. No borrowings were made on the line-
of-credit and FluoroScan elected not to renew this credit facility upon its
expiration in May, 1995. FluoroScan believes cash balances, which totaled
$5,316,908 at March 31, 1996, and internally generated funds will be
sufficient to meet its liquidity needs for the foreseeable future. FluoroScan
may use portions of its cash balance to fund increases in sales and marketing
programs and in research and development. Such cash investments, while
designed to increase net sales, would increase selling, general and
administrative expenses.
Capital expenditures for the three months ended March 31, 1996 were $24,039,
compared with $67,842 in the comparable period of the prior year. Expenditures
primarily consisted of purchases of computer and office equipment.
Capital expenditures in 1995 were $239,970, compared with $395,409 in 1994.
Expenditures in 1995 consisted primarily of manufacturing equipment and
computer equipment and software. The majority of prior year expenditures
related to tooling and molds associated with the development of new products,
computer equipment, and leasehold improvements.
80
<PAGE>
HOLOGIC MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain biographical information regarding the executive
officers and directors of Hologic, including information furnished by them as
to their principal occupation for the last five (5) years, certain other
directorships held by them and their ages as of July 25, 1996.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
S. David Ellenbogen..... 58 Chairman of the Board and Chief Executive Officer
Jay A. Stein............ 54 Senior Vice President, Technical Director and Director
Steve L. Nakashige...... 47 President and Chief Operating Officer
Jean Chaintreuil........ 40 Vice President of European Operations
Mark A. Duerst.......... 40 Vice President of Sales & Marketing
Glenn P. Muir........... 37 Vice President of Finance and Treasurer
Theodore H. Vrountas.... 62 Vice President of Operations
Joel B. Weinstein....... 46 Vice President of New Business Development
Irwin Jacobs............ 58 Director
William A. Peck......... 62 Director
Gerald Segel............ 74 Director
Elaine Ullian........... 48 Director
</TABLE>
Mr. Ellenbogen, a co-founder of Hologic, 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 Hologic, 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 Technologies, Inc. ("Vivid") and has been devoting
approximately sixteen hours per week to Vivid pursuant to a management
agreement between Hologic and Vivid. See "Certain Transactions".
Dr. Stein, a co-founder of Hologic, 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 Hologic and Vivid. See "Certain
Transactions."
Mr. Nakashige has served as President and Chief Operating Officer of Hologic
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.
Mr. Chaintreuil has served as Vice President of European Operations of
Hologic since February 1993. Mr. Chaintreuil has held the position of
President, Hologic Europe since joining Hologic 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.
81
<PAGE>
Mr. 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 Hologic 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.
Mr. Muir, a Certified Public Accountant, has served as Vice President of
Finance and Treasurer of Hologic since February 1992. Prior to that, Mr. Muir
held the position of Controller since joining Hologic 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.
Mr. Vrountas has served as Vice President of Operations since March 1994 and
as an executive officer of Hologic since December 1994. Prior to joining
Hologic, 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.
Mr. 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 Hologic 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.
Mr. Jacobs has been a director of Hologic since January 1990. Mr. Jacobs has
been the President of Dataviews, 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.
Dr. Peck has been a director of Hologic 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.
Mr. Segel has been a director of Hologic 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.
Ms. Ullian joined the Board of Directors in February 1996, Ms. Ullian is
currently President and Chief Executive Officer of Boston University Medical
Center Hospital, and has held this position since April 1994. Ms. Ullian has
considerable experience in financial management, strategic planning and
marketing, and in direct operations of clinical facilities. From January 1987
to March 1994, Ms. Ullian held the position of President and Chief Executive
Officer of Faulkner Corporation/Faulkner Hospital. From 1984 to 1987, she was
Vice President for Clinical Operations at New England Medical Center. Ms.
Ullian is currently a member of the Governor's Council on Economic Growth and
Technology.
Hologic has agreed with Larry S. Grossman and Arlen L. Issette, the Chairman
of the Board and President of FluoroScan, respectively, that, at the Effective
Time, in addition to remaining as directors and executive
82
<PAGE>
officers of FluoroScan, they will become Vice Presidents of Hologic. In
addition, Hologic has agreed that, at the Effective Time, the Hologic Board of
Directors will increase the number of directors from six to seven, and that
Mr. Grossman will be elected by the Board of Directors to fill the vacancy.
Hologic has further agreed to nominate Mr. Grossman as a director of Hologic
for the next two annual meetings of stockholders of Hologic provided that he
continues to serve as an executive officer of Hologic or FluoroScan.
Biographical information regarding Mr. Grossman and Mr. Issette is set forth
below. See "The Merger and Related Transactions --Interests of Certain Persons
in the Merger."
<TABLE>
<CAPTION>
POSITION WITH HOLOGIC
NAME AGE FOLLOWING THE MERGER
---- --- ---------------------
<S> <C> <C>
Larry S. Grossman............................ 46 Vice President and Director
Arlen L. Issette............................. 53 Vice President
</TABLE>
Mr. Grossman co-founded HealthMate of Illinois, Inc. (a predecessor to
FluoroScan) in 1982, and HealthMate, Inc. (FluoroScan's prior name before the
close of its 1991 reorganization) in 1984. Mr. Grossman left as an officer of
HealthMate, Inc. after a disagreement with certain members of the Board of
Directors as to HealthMate's future direction and resigned as a director in
1987. Mr. Grossman returned to Healthmate in March 1989 and, since that date,
has served as a director, Chairman of the Board, Chief Executive Officer and
Secretary of FluoroScan and its predecessors. Mr. Grossman serves as a
director of Trans Leasing International, Inc., a lessor of medical, scientific
and other equipment to various health care providers.
Mr. Issette has been a director, President and Treasurer of FluoroScan since
March 1989. He previously served as a director of HealthMate from 1984 to
1987. From 1987 to March 1989, Mr. Issette was employed by Pain Prevention
Labs, Inc., a manufacturer of an electronic dental anesthesia device.
COMPENSATION OF DIRECTORS
Each non-employee director received (i) an annual retainer of $3,000,
payable $750 per quarter, (ii) a director's meeting fee of $600 for each
meeting of the Board of Directors at which the director was physically present
and $300 for each meeting at which the director participated by telephone and
(iii) a committee meeting fee for each meeting of a committee of the Board of
Directors at which the director was physically present, in the amount of $600
if the meeting was held on a day other than the day of the meeting of the
Board of Directors and $300 if held on the same day as the meeting of the
Board of Directors, but no fee if the committee meeting was held at the same
time or immediately in conjunction with the meeting of the Board of Directors.
Non-employee directors are also eligible to receive stock options pursuant
to Hologic's Amended and Restated 1990 Non-Employee Director Stock Option
Plan.
83
<PAGE>
COMPENSATION OF HOLOGIC EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth information
concerning the compensation during the last three fiscal years of Hologic's
Chief Executive Officer and the four other most highly compensated executive
officers whose annual salary and bonus, if any, exceeded $100,000 for services
in all capacities to Hologic during the last fiscal year (the "named executive
officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
LONG-TERM
COMPENSATION
NAME AND FISCAL SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(2) COMPENSATION($)(3)
------------------ ------ ---------- --------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
S. David Ellenbogen..... 1995 $ 167,775 $ 42,500 130,000 $2,310
Chairman and CEO 1994 176,858 60,000 50,000 2,310
1993 154,869 -- 2,774
Jay A. Stein............ 1995 167,495 42,500 130,000 2,310
Senior Vice President 1994 176,672 60,000 50,000 2,310
1993 154,869 -- 2,947
Steve L. Nakashige...... 1995 133,909 40,000 80,000 3,954
President and COO 1994(1) 58,289 15,000 200,000
Jean Chaintreuil........ 1995 218,406 5,000 --
Vice President 1994 174,616 --
European Operations 1993 165,037 20,000
Mark A. Duerst.......... 1995 169,592 5,000 40,000 2,310
Vice President 1994 142,112 10,000 100,000 3,041
Sales and Marketing 1993 109,651 24,000 1,817
</TABLE>
- --------
(1)Mr. Nakashige joined Hologic in fiscal 1994.
(2) Adjusted to reflect a two-for-one stock split in the form of a stock
dividend effected in March 1996.
(3) The amounts reported in this column consist of Hologic's matching
contribution under Hologic's 401(k) Profit-Sharing Plan.
Employment Contract. Hologic's European subsidiaries have entered into an
Employment Agreement (the "Employment Agreement") with Jean Chaintreuil,
Hologic's Vice President of European Operations, dated October 1, 1991,
whereby Mr. Chaintreuil serves as an executive to Hologic Europe N.V.
("Hologic Belgium") and Hologic France S.A. ("Hologic France") and as a
Director of Hologic Belgium, Hologic France and Hologic Espana, S.A. for a
total annual base compensation not to exceed 660,000 French Francs. Mr.
Chaintreuil is also eligible under the Employment Agreement to receive certain
performance bonuses and to be recommended for certain performance-based stock
options to be granted by Hologic. The Employment Agreement is for an
indeterminate period.
84
<PAGE>
Stock Option Grants in Last Fiscal Year. The following table sets forth the
stock options granted to Hologic's named executive officers during the fiscal
year ended September 30, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (5)
------------------------------------------------------------- ---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SHARE)(1)(4) DATE 5%($) 10%($)
---- ------------------ --------------- --------------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
S.D. Ellenbogen......... 10,000(2) 1% $6.18 4/4/05 $ 38,913 $ 98,613
120,000(3) 16 8.25 6/28/05 622,606 1,577,805
J. Stein................ 10,000(2) 1 6.19 4/4/05 38,913 98,613
120,000(3) 16 8.25 6/28/05 622,606 1,577,805
S. Nakashige............ 80,000(3) 11 8.25 6/28/05 415,070 1,051,870
J. Chaintreuil.......... -- -- -- -- -- --
M. Duerst............... 40,000(3) 5 8.25 6/28/05 207,535 525,935
</TABLE>
- --------
(1) Adjusted to reflect a two-for-one stock split in the form of a stock
dividend effected in March 1996.
(2) Options vest at the rate of 10% per year, beginning on January 1, 1996,
and provide for accelerated vesting of an additional 10% to 20% of the
shares for any fiscal year in which Hologic achieves pre-tax operating
earnings of 5% or 10% of sales, respectively.
(3) Options vest at the rate of 20% per year, plus the pre-tax operating
earnings percentage of the most recently ended fiscal year, beginning on
January 1, 1996, and capped at 33 1/3% per year.
(4) The exercise price is equal to the fair market value of the stock on the
date of grant.
(5) The 5% and 10% assumed rates of annual compounded stock price appreciation
are mandated by the rules of the SEC and do not represent Hologic's
estimate or projection of future Hologic Common Stock prices.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values. The following table sets forth certain information regarding the
exercise of stock options during the fiscal year ended September 30, 1995 and
the fiscal year-end value of unexercised options for Hologic's named executive
officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE AT FISCAL YEAR END (#) FISCAL YEAR END($)(3)
NAME ON EXERCISE(#)(1) REALIZED($)(2) EXERCISABLE / UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE
---- ----------------- -------------- ------------------------------ -------------------------
<S> <C> <C> <C> <C>
S. D. Ellenbogen........ -- -- 15,000/165,000 $144,375/$ 780,000
J. Stein................ -- -- 15,000/165,000 144,375/ 780,000
S. Nakashige............ 5,000 $25,313 55,000/220,000 429,688/ 1,353,750
J. Chaintreuil.......... -- -- 10,000/ 10,000 88,625/ 89,500
M. Duerst............... 14,500 84,731 1,000/150,800 -- / 917,875
</TABLE>
- --------
(1) Adjusted to reflect a two-for-one stock split in the form of a stock
dividend effected in March 1996.
(2) The amount "realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date of
exercise over the exercise price). However, because the executive officers
may keep the shares they acquired upon the exercise of the options (or
sell them at a different price), these amounts do not necessarily reflect
cash realized upon the sale of those shares.
(3) Based upon the $11.50 closing market price of Hologic's Common Stock as
reported on the Nasdaq National Market System on September 30, 1995 minus
the respective option exercise price.
Executive Bonus Program. The Compensation Committee of the Board of
Directors approved an Executive and Key Employee Bonus Program for fiscal 1996
under which executive officers, senior management and key contributors
selected by the Compensation Committee may be eligible for cash bonuses,
awarded at the discretion of the Compensation Committee, to be paid in the
first quarter of fiscal 1997. Under this program, if pre-tax profits exceed
$2,000,000, a bonus pool is expected to be created equal to up to 8% of
Hologic's pre-tax
85
<PAGE>
profits. If pre-tax profits exceed $1,000,000 and are $2,000,000 or less, a
bonus pool is expected to be created equal to up to 8% of Hologic's pre-tax
profits which exceed a base amount of $1,000,000. No bonus pool is expected to
be created if Hologic's pre-tax profits do not exceed $1,000,000. For fiscal
1995, bonuses of $225,000 were granted under an identical program approved for
that year.
COMPENSATION OF CERTAIN FLUOROSCAN EXECUTIVE OFFICERS
The following table provides historical information concerning the annual
and other compensation for services in all capacities to FluoroScan for the
last three fiscal years of Mr. Grossman and Mr. Issette, who will become
executive officers of Hologic upon consummation of the Merger. For a summary
of Mr. Grossman's and Mr. Issette's employment terms following the Effective
Time, see "The Merger and Related Transactions--Interests of Certain Persons
in the Merger."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------------ ---------------------
AWARDS
SECURITIES ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS(1) COMPENSATION($)
- ------------------------- ---- --------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Larry S. Grossman,..... 1995 $210,000 $270,000 100,000 $26,630(1)
Chairman, Chief
Executive 1994 200,000 200,000 100,000 22,818
Officer and Secretary
of FluoroScan 1993 153,596 150,000 -- --
Arlen L. Issette,
President............. 1995 210,000 270,000 100,000 25,600(2)
and Treasurer of
FluoroScan 1994 200,000 200,000 100,000 22,307
1993 153,596 150,000 -- --
</TABLE>
- --------
(1) Represents shares of FluoroScan Common Stock.
(2) Includes (i) $4,271, representing term life insurance premiums paid by
FluoroScan and (ii) $22,359, representing whole life insurance premiums
paid by FluoroScan pursuant to a split dollar agreement pursuant to which
FluoroScan will be repaid its contributed premiums upon the occurrence of
Mr. Grossman's death or termination of employment.
(3) Includes (i) $3,944, representing term life insurance premiums paid by
FluoroScan and (ii) $21,656, representing whole life insurance premiums
paid by FluoroScan pursuant to a split dollar agreement pursuant to which
FluoroScan will be repaid its contributed premiums upon the occurrence of
Mr. Issette's death or termination of employment.
86
<PAGE>
Stock Option Grants in Last Fiscal Year. The following table sets forth the
options to purchase FluoroScan Common Stock granted by FluoroScan to Messrs.
Grossman and Issette during FluoroScan's fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
--------------------------------------- ------------------------- ---
NUMBER OF
FLUOROSCAN % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE)(2) DATE 5% ($) 10% ($)
---- ------------------ --------------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
L. Grossman............. 100,000(1) 23.1% $6.60 1/3/2000 $ 182,346 $ 402,937
A. Issette.............. 100,000(1) 23.1 $6.60 1/3/2000 182,346 402,937
</TABLE>
- --------
(1) Options granted to Messrs. Grossman and Issette became fully exercisable
starting January 3, 1995.
(2) The exercise price represents 110% of the fair market value of the stock
on the grant date.
(3) The 5% and 10% assumed rates of annual compounded stock price appreciation
are mandated by the rules of the SEC and do not represent FluoroScan's
estimate or projection of future FluoroScan Common Stock prices.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values. The following table sets forth certain information regarding the
exercise of options to purchase FluoroScan Common Stock during FluoroScan's
fiscal year ended December 31, 1995 and the fiscal year-end value of
unexercised options for Messrs. Grossman and Issette.
<TABLE>
<CAPTION>
NUMBER OF
FLUOROSCAN
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE AT 12/31/95(#) 12/31/95($)(2)
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE / UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ----------- --------------------------- -------------------------
<S> <C> <C> <C> <C>
L. Grossman............. -- -- 200,000/0 $0/$0
A. Issette.............. -- -- 200,000/0 0/ 0
</TABLE>
- --------
(1) The amount "realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date of
exercise over the exercise price). However, because the executive officers
may keep the shares they acquired upon the exercise of the options (or sell
them at a different price), these amounts do not necessarily reflect cash
realized upon the sale of those shares.
(2) Based upon the $6.50 closing market price of FluoroScan's Common Stock as
reported on the Nasdaq National Market System on December 31, 1995 minus
the respective option exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions regarding executive compensation are made by Hologic's
Compensation Committee of the Board of Directors, which is composed of Irwin
Jacobs, William A. Peck and Gerald Segel. The Compensation Committee also
administers Hologic's 1986 Combination Stock Option Plan, the Employee Stock
Purchase Plan, will administer Hologic's Executive and Key Employee Bonus
Program for fiscal 1996 and will administer Hologic's 1995 Combination Stock
Option Plan, if approved. None of the members of the Compensation Committee
has ever been an officer or employee of Hologic or any of its subsidiaries.
87
<PAGE>
CERTAIN TRANSACTIONS
For the fiscal year ended September 30, 1995, the following transactions
occurred which involved more than $60,000 between Hologic and any director,
executive officer, five percent (5%) beneficial owner of Hologic's Common
Stock or any member of the immediate family of any of the foregoing persons.
VIVID TECHNOLOGIES, INC.
In June 1989, Hologic granted an exclusive worldwide license of certain of
its QDR technology to Vivid Technologies, Inc. ("Vivid") 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
Hologic. 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
Hologic royalties of 5% of the first $50 million of net sales of products
using Hologic'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 Hologic under this arrangement are $7 million. In fiscal
1995, Vivid paid Hologic royalties of approximately $719,000 under the License
Agreement.
Under a management agreement, Hologic has agreed to provide Vivid with
management, engineering and administrative support, and had provided space at
Hologic's facilities. Vivid vacated this space in the second quarter of fiscal
1996. The support services provided by Hologic 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 Hologic its proportionate share of Hologic's overhead,
including rent and the salary of Hologic's employees rendering services to
Vivid. Under this arrangement, no compensation is paid by Vivid to any of
Hologic's employees. The management agreement may be terminated by either
party on six month's written notice. For the fiscal year ended September 30,
1995, Vivid was charged approximately $740,000 by Hologic for services
rendered under the agreement, manufactured sub-assemblies, spare parts and
space at Hologic's facilities. In December 1995, Vivid paid Hologic a $40,000
bonus for the management services provided in fiscal 1995. Hologic estimates
that Mr. Ellenbogen and Dr. Stein have each been spending approximately
sixteen and eight hours per week, respectively, on matters involving Vivid.
INDEBTEDNESS
In fiscal 1995, Steve L. Nakashige, the President and Chief Operating
Officer of Hologic, borrowed an aggregate of $161,000 from Hologic pursuant to
a bridge loan to assist Mr. Nakashige in the purchase of a local primary
residence in connection with his relocation to Massachusetts. In fiscal 1995,
Mark A. Duerst, the Vice President of Sales and Marketing of Hologic, borrowed
an aggregate of $155,000 from Hologic pursuant to a bridge loan to assist Mr.
Duerst in the purchase of a local primary residence in connection with his
relocation to Massachusetts. Both loans had no stated interest rate and have
been repaid in full.
88
<PAGE>
PRINCIPAL STOCKHOLDERS OF HOLOGIC
The following table sets forth certain information as of August 5, 1996 with
respect to the beneficial ownership of Hologic's Common Stock of each
director, each nominee for director, each named executive officer in the
Summary Compensation Table under "Executive Compensation", above, all
executive officers and directors as a group, and each person known by Hologic
to be the beneficial owner of 5% or more of Hologic's Common Stock. This
information is based upon information received from or on behalf of the named
individuals. All shares numbers have been adjusted to reflect a two-for-one
stock split in the form of a stock dividend effected by Hologic in March 1996.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
------------------------------
NUMBER PERCENT OF
NAME OF BENEFICIAL OWNER OF SHARES COMMON SHARES
------------------------ -------------- --------------
<S> <C> <C>
S. David Ellenbogen(2)....................... 432,720 3.8%
590 Lincoln Street
Waltham, Massachusetts 02154
Jay A. Stein(3).............................. 328,840 2.9
590 Lincoln Street
Waltham, Massachusetts 02154
Steve L. Nakashige(4)........................ 49,000 *
Jean Chaintreuil(4).......................... 1,000 *
Mark A. Duerst(4)............................ 1,352 *
Irwin Jacobs(4).............................. 24,000 *
William A. Peck(4)........................... 8,000 *
Gerald Segel(4).............................. 20,000 *
Elaine Ullian................................ 0 *
All directors and executive officers as a
group (11 persons)(4)....................... 935,392 8.2
</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) 45,030 shares held by, or in trust for, Mr. Ellenbogen's
children and grandchildren and (ii) 7,230 shares held by Mr. Ellenbogen as
trustee, all of which shares Mr. Ellenbogen disclaims beneficial
ownership.
(3) Includes (i) 7,230 shares held by, or in trust, for Dr. Stein's children
and (ii) 27,230 shares held by Dr. Stein as trustee or custodian, all of
which shares Dr. Stein disclaims beneficial ownership.
(4) Includes the following shares subject to options which are exercisable
within 60 days after July 27, 1996: Mr. Nakashige--49,000; Mr.
Chaintreuil--1,000; Mr. Duerst--900; Mr. Jacobs--24,000; Dr. Peck--8,000;
Mr. Segel--20,000; and all executive officers as a group--118,900.
89
<PAGE>
PRINCIPAL STOCKHOLDERS OF FLUOROSCAN
The following table sets forth, as of August 5, 1996, certain information
with respect to the beneficial ownership of FluoroScan's Common Stock before
giving effect to the Merger, by (i) each person known by FluoroScan to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director of FluoroScan, (iii) FluoroScan's Chief Executive Officer and
FluoroScan's only highly compensated executive officer, other than the Chief
Executive Officer, whose total annual salary and bonus equaled or exceeded
$100,000, and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) OWNERSHIP(6)
------------------- --------------------- ------------
<S> <C> <C>
Larry S. Grossman.......................... 1,033,576(3)(5) 21.0%
Arlen L. Issette........................... 1,033,576(4)(5) 21.0
Larry Bier................................. 21,000(7) *
Bruce W. Johnson........................... 21,000(8) *
Theodore Sall, Ph.D........................ 21,900(9) *
Max Cooper(1).............................. 274,185(10) 5.9
All executive officers and directors as a
group (7 persons)......................... 2,142,552(11) 40.7
</TABLE>
- --------
* Less than (1%)
(1) The address of each of the stockholders listed, excepting Mr. Cooper, is
c/o FluoroScan Imaging Systems, Inc., 650-B Anthony Trail, Northbrook,
Illinois 60062. The address of Mr. Cooper is 124 Summit Parkway,
Birmingham, Alabama 35209.
(2) Unless otherwise indicated below, the persons in the above table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
(3) Includes 300,000 shares that Mr. Grossman has a right to acquire pursuant
to options.
(4) Includes 300,000 shares that Mr. Issette has a right to acquire pursuant
to options.
(5) Excludes 153,396 shares held by John Tauber, a former officer, over which
Messrs. Grossman and Issette have voting control, but as to which they
disclaim beneficial ownership. Also excludes 76,480 shares held by Kevin
Hughes, an employee of the Company, over which shares Messrs. Grossman and
Issette have voting control, but over which they disclaim beneficial
ownership.
(6) Calculated on the basis of the amount of outstanding securities
(4,622,894) plus, for each person or group, any securities that person or
group has the right to acquire within 60 days pursuant to options.
(7) Includes 21,000 shares that Mr. Bier has the right to acquire pursuant to
options.
(8) Includes 21,000 shares that Mr. Johnson has the right to acquire pursuant
to options.
(9) Includes 21,000 shares that Mr. Sall has the right to acquire pursuant to
options.
(10) Includes 45,000 shares and 36,500 shares issuable upon the exercise of
warrants owned by CLP Corporation, over which shares Mr. Cooper has
shared voting and dispostive power. Information presented is as of
November 11, 1995 according to the Schedule 13D filed by Mr. Cooper with
the Securities and Exchange Commission.
(11) Includes 635,000 shares which one or more of the executive officers or
directors have a right to acquire within 60 days pursuant to options.
90
<PAGE>
DESCRIPTION OF HOLOGIC COMMON STOCK
Hologic's authorized capital stock consists of 30,000,000 shares of Common
Stock, $.01 par value, and 1,622,685 shares of Preferred Stock, $.01 par value
(the "Hologic Preferred Stock").
HOLOGIC COMMON STOCK
The holders of Hologic 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 Hologic, the holders of Hologic 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. Hologic
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 Hologic 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 Hologic Common Stock do not have cumulative voting rights in
the election of directors. All of the shares of Hologic Common Stock are, and
the shares to be delivered upon consummation of the Merger will be, fully paid
and non assessable.
As of August 5, 1996, there were 11,310,790 shares of Hologic Common Stock
outstanding, held of record by approximately 262 stockholders.
PREFERRED STOCK
Hologic is authorized to issue up to 1,622,685 shares of Hologic Preferred
Stock, none of which are outstanding. The Board of Directors may, without
future action of the stockholders of Hologic, issue the Hologic 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 Hologic Common Stock will be
subject to, and may be adversely affected by, the rights of holders of any
Hologic Preferred Stock that may be issued in the future. Issuances of Hologic
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
Hologic. Hologic has no present plans to reissue any shares of Hologic
Preferred Stock.
CERTAIN PROVISIONS AFFECTING STOCKHOLDERS
In addition to the Hologic Preferred Stock, the Hologic Certificate of
Incorporation includes several additional provisions which may render more
difficult an unfriendly tender offer, proxy content, merger or other change in
control of Hologic. These provisions may discourage bids for Hologic and
therefore may limit the price that certain investors might be willing to pay
in the future for shares of Hologic Common Stock.
The Hologic 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
has become known as greenmail. The anti-greenmail provision prohibits Hologic
from purchasing any shares of Hologic 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 Hologic 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 Hologic (Mr. Ellenbogen and Dr. Stein), who
acquires more than 5% of Hologic'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 Hologic Common Stock or when the purchases are
effected on the open market.
91
<PAGE>
The Hologic Certificate of Incorporation also contains a provision that will
require the affirmative vote of the holders of 80% of the outstanding Hologic
Common Stock to approve amendments to the Hologic Certificate of Incorporation
or to approve extraordinary transactions that are required to be approved by
stockholders under Delaware Law, including mergers, sales of substantially all
of Hologic's assets and dissolution, which actions are not approved by a
majority of the continuing Directors (as defined below) of Hologic. The
Hologic Certificate of Incorporation provides that the affirmative vote of the
holders of only a majority of the outstanding Hologic 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 Hologic'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 Law, if such transactions were not approved by the Continuing
Directors to management. 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 Hologic 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 Hologic and its stockholders. These
transactions include (i) the purchase or acquisition through exchange or
otherwise of any of Hologic's outstanding equity securities, (ii) the merger
or consolidation of Hologic with another corporation and (iii) the purchase or
other acquisition of all or substantially all of Hologic'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 Hologic's decision
not to elect out of the statute's provisions, the statute applies to Hologic.
RIGHTS DISTRIBUTION
In 1992, the Board of Directors declared a dividend distribution of one
right (a "Right") for each outstanding share of Hologic Common Stock held of
record on December 22, 1992 or issued thereafter prior to "Separation Time,"
as defined below. After December 22, 1992 and for so long as the Rights are
not transferable separately from the Hologic Common Stock, one Right is deemed
to be delivered with each share of Hologic Common Stock issued or transferred
by Hologic.
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 of the Board of Directors may decide) (a "Flip-in Date"), after the
92
<PAGE>
announcement that a person has acquired 15% or more of the outstanding Hologic
Common Stock of Hologic (or that a person already owning 15% has acquired any
more Hologic 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 Hologic Common Stock. Until the Separation
Time, the Rights will be evidenced solely by the Hologic Common Stock
certificates and may be transferred only with the Hologic Common Stock.
After the Separation Time, the Rights become exercisable and may be
transferred independently of shares of Hologic 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 the number of shares of
Hologic's Hologic Common Stock having a market value equal to twice the
exercise price of $15 per share (the "Exercise Price"). However, in lieu of
the rights to purchase shares of Hologic's Hologic Common Stock at an
effective 50% discount, the Board of Directors of Hologic may elect to issue
one share of Hologic Common Stock for each Right held by each holder other
than the Acquiring Person.
After the Acquiring Person has become such, and prior to the expiration of
the Rights, Hologic may not (i) consolidate or merge with any other person,
(ii) sell or otherwise transfer to any other person more than 50% of Hologic's
assets, or assets generating more than 50% of Hologic'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-dealt 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 Hologic at any time prior to the close of
business on a Flip-in Date.
The provisions in the Certificate of Incorporation and By-Laws referred to
above, and the authority of the Board of Directors to issue additional shares
of Hologic 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 Hologic. The distribution of Rights and certain aspects of the
foregoing provisions in Hologic's Certificate of Incorporation and 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 Hologic's Common Stock is American
Stock Transfer and Trust Company.
93
<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS OF HOLOGIC AND FLUOROSCAN
The following is a summary of certain of the material differences between
the rights of holders of Hologic Common Stock and the rights of holders of
FluoroScan Common Stock. Hologic and FluoroScan are each organized under the
laws of the State of Delaware, therefore, such differences arise from
differences between various provisions of the Certificate of Incorporation,
By-Laws and Rights Agreement of Hologic (the "Hologic Charter Documents") and
the Amended and Restated Certificate of Incorporation and By-Laws of
FluoroScan (the "FluoroScan Charter Documents"). For a complete description of
the rights of holders of Hologic Common Stock, see "Description Of Hologic
Capital Stock."
NUMBER, CLASSIFICATION AND REMOVAL OF DIRECTORS
The Hologic Charter Documents provide that the number of directors of
Hologic shall be fixed by the Board of Directors or by the vote of the holders
of 80% of the outstanding voting stock of Hologic, and that any one or more of
the directors may be removed from office only with cause, by a vote of the
majority of the directors then in office or by a vote of the holders of 80% of
the outstanding voting stock of Hologic. Hologic does not have a classified
Board of Directors and each director holds office from the time such person is
elected until the next annual meeting of the stockholders of Hologic and
thereafter until their successors are chosen and qualified.
The FluoroScan Charter Documents provide that the number of directors of
FluoroScan shall be fixed by a majority of the directors in office, and that
any one or more of the directors may be removed, with or without cause, by the
vote of the holders of a majority of the outstanding voting stock of
FluoroScan entitled to vote on the election of directors; provided, however,
that if cumulative voting is permitted and less than the entire Board of
Directors is to be removed, no director may be removed without cause if the
votes cast against the removal of such director would be sufficient to elect
such director if cumulatively voted at an election of the entire Board of
Directors. FluoroScan has a classified Board of Directors consisting of one
Class I Director, two Class II Directors and two Class III Directors. Pursuant
to FluoroScan Charter Documents, directors are elected for terms ending three
years from the annual meeting of FluoroScan stockholders at which such
director was last elected.
CERTAIN ADDITIONAL PROVISIONS AFFECTING STOCKHOLDERS
The Hologic Charter Documents contain additional provisions which are not
contained in FluoroScan Charter Documents, which provisions may render more
difficult an unfriendly tender offer, proxy contest, merger or other change in
control. These provisions include a so-called "anti-greenmail" provision, a
super-majority voting provision, and a provision that 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 Hologic and its stockholders. See "Description Of Hologic
Capital Stock--Certain Provisions Affecting Stockholders." The Hologic Charter
Documents also include the Rights Agreement, pursuant to which one right is
distributed with each share of Hologic Common Stock. Each right entitles each
eligible holder thereof, under certain circumstances, to receive or purchase
additional shares of Hologic Common Stock. See "Description Of Hologic Capital
Stock--Rights Distribution." The FluoroScan Charter Documents contain no such
provisions.
The foregoing summary does not purport to be a complete statement of the
rights of holders of Hologic Common Stock and FluoroScan Common Stock under,
and is qualified in its entirety by reference to, the Delaware Law, the
Hologic Charter Documents, and FluoroScan Charter Documents. See "Description
Of Hologic Capital Stock" for a more detailed summary of certain rights
relating to Hologic Common Stock .
94
<PAGE>
LEGAL MATTERS
The validity of the shares of Hologic Common Stock to be issued in
connection with the Merger and certain tax matters will be passed upon for
Hologic by Brown, Rudnick, Freed & Gesmer, Boston, Massachusetts. Certain tax
matters in connection with the Merger will be passed upon for FluoroScan by
Katten Muchin & Zavis of Chicago, Illinois, and for Hologic by Brown, Rudnick,
Freed & Gesmer. A member of Brown, Rudnick, Freed & Gesmer is the Secretary of
Hologic and owns 1,000 shares of Hologic Common Stock and options to purchase
5,000 shares of Hologic Common Stock.
EXPERTS
The Hologic audited financial statements and schedules included in this
Proxy Statement/Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports.
The FluoroScan audited financial statements included in this Proxy
Statement/Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such report given upon the authority of said
firm as experts in auditing and accounting.
95
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOLOGIC, INC.
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of September 24, 1994, September 30, 1995
and March 30, 1996 (unaudited).......................................... F-3
Consolidated Statements of Operations for the years ended September 25,
1993, September 24, 1994, September 30, 1995, the six months ended March
25, 1995 (unaudited) and the six months ended March 30, 1996
(unaudited)............................................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended
September 25, 1993, September 24, 1994, September 30, 1995 and the six
months ended March 30, 1996 (unaudited)................................. F-5
Consolidated Statements of Cash Flows for the years ended September 25,
1993, September 24, 1994, September 30, 1995, the six months ended March
25, 1995 (unaudited) and the six months ended March 30, 1996
(unaudited)............................................................. F-6
Notes to Consolidated Financial Statements............................... F-7
FLUOROSCAN IMAGING SYSTEMS, INC.
Report of Independent Certified Public Accountants....................... F-18
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March
31, 1996 (unaudited).................................................... F-19
Consolidated Statements of Income for the years ended December 31, 1993,
1994 and 1995, and the three months ended March 31, 1995 and 1996
(unaudited)............................................................. F-20
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31,
1996 (unaudited)........................................................ F-21
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and the three months ended March 31, 1995 and 1996
(unaudited)............................................................. F-22
Notes to Consolidated Financial Statements............................... F-23
HOLOGIC, INC. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Overview................................................................. F-30
Balance Sheet as of March 30, 1996....................................... F-31
Statement of Operations for the year ended September 25, 1993............ F-32
Statement of Operations for the year ended September 24, 1994............ F-33
Statement of Operations for the year ended September 30, 1995............ F-34
Statement of Operations for the six months ended March 30, 1996.......... F-35
</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.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 21(b) is
the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
November 22, 1995 (except with respect to the matter discussed in Note 13, as
to which the date is December 14, 1995)
F-2
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER MARCH 30,
24, 1994 30, 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............. $ 5,880,010 $ 7,447,813 $57,883,436
Short-term investments................ 3,519,515 2,492,671 4,132,744
Accounts receivable, less reserves of
$850,000 in 1994 and 1995 and
$1,200,000 at March 30, 1996......... 10,893,649 11,643,883 16,172,161
Inventories........................... 4,435,033 6,917,000 6,735,613
Prepaid expenses and other current
assets............................... 1,584,132 2,058,707 2,503,637
----------- ----------- -----------
Total current assets................ 26,312,339 30,560,074 87,427,591
----------- ----------- -----------
Property and Equipment, at cost:
Equipment............................. 1,922,473 2,600,381 3,188,161
Furniture and fixtures................ 553,393 652,446 694,562
Leasehold improvements................ 448,529 506,495 548,375
----------- ----------- -----------
2,924,395 3,759,322 4,431,098
Less--Accumulated depreciation and
amortization......................... 1,796,826 2,298,168 2,578,428
----------- ----------- -----------
1,127,569 1,461,154 1,852,670
----------- ----------- -----------
Other Assets, net....................... 1,057,254 1,840,785 2,206,047
----------- ----------- -----------
$28,497,162 $33,862,013 $91,486,308
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit........................ $ 2,417,034 $ 2,058,898 $ 2,183,150
Accounts payable...................... 1,865,413 3,773,000 3,308,513
Accrued expenses...................... 3,474,482 3,965,750 5,528,095
Deferred revenue...................... 867,861 1,392,667 1,848,587
----------- ----------- -----------
Total current liabilities........... 8,624,790 11,190,315 12,868,345
----------- ----------- -----------
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--30,000,000 shares
Issued and outstanding--8,049,162
shares, 8,244,200 shares and
11,040,566 shares at September 24,
1994, September 30, 1995 and March
30, 1996, respectively............. 80,492 82,442 110,406
Capital in excess of par value.......... 14,409,839 15,313,672 66,907,258
Retained earnings....................... 5,551,074 7,420,593 11,751,600
Cumulative translation adjustment....... (169,033) (145,009) (151,301)
----------- ----------- -----------
Total stockholders' equity.......... 19,872,372 22,671,698 78,617,963
----------- ----------- -----------
$28,497,162 $33,862,013 $91,486,308
=========== =========== ===========
</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 SIX MONTHS ENDED
------------------------------------- ------------------------
SEPTEMBER SEPTEMBER SEPTEMBER MARCH 25, MARCH 30,
25, 1993 24, 1994 30, 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales......... $24,139,565 $37,056,109 $41,129,782 $18,303,724 $32,067,304
Other revenue......... 708,831 1,427,634 2,270,068 926,250 1,453,397
----------- ----------- ----------- ----------- -----------
24,848,396 38,483,743 43,399,850 19,229,974 33,520,701
----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Cost of product
sales................ 13,729,012 20,865,075 22,090,963 10,235,955 15,211,781
Research and
development.......... 3,182,412 3,441,871 4,300,474 2,076,566 3,076,899
Selling and
marketing............ 5,472,413 5,892,377 7,835,418 3,534,468 5,758,126
General and
administrative....... 3,500,998 4,189,377 4,461,335 2,039,807 3,250,551
Litigation expenses... -- -- 2,533,493 351,859 797,819
Restructuring costs... 900,000 -- -- -- --
----------- ----------- ----------- ----------- -----------
26,784,835 34,388,700 41,221,683 18,238,655 28,095,176
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations......... (1,936,439) 4,095,043 2,178,167 991,319 5,425,525
Interest Income......... 300,468 315,886 609,678 282,571 749,245
Other Expense........... (438,869) (80,752) (268,326) (156,560) (123,763)
----------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes....... (2,074,840) 4,330,177 2,519,519 1,117,330 6,051,007
Provision (Benefit) for
Income Taxes........... (300,000) 1,335,000 650,000 320,000 1,720,000
----------- ----------- ----------- ----------- -----------
Net income (loss)... $(1,774,840) $ 2,995,177 $ 1,869,519 $ 797,330 $ 4,331,007
=========== =========== =========== =========== ===========
Net Income (Loss) Per
Common and Common
Equivalent Share:
Primary............... $ (.23) $ .36 $ .21 $ .09 $ .42
=========== =========== =========== =========== ===========
Fully diluted......... $ .34 $ .20
=========== ===========
Weighted Average Number
of Common and Common
Equivalent Shares
Outstanding:
Primary............... 7,860,136 8,389,828 8,751,760 8,799,086 10,298,346
=========== =========== =========== =========== ===========
Fully diluted......... 8,683,620 9,150,852
=========== ===========
</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
------------------- CAPITAL IN CUMULATIVE TOTAL
NUMBER OF $.01 PAR EXCESS OF RETAINED TRANSLATION STOCKHOLDERS'
SHARES VALUE PAR VALUE EARNINGS ADJUSTMENT EQUITY
---------- -------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1992................... 7,812,200 $ 78,122 $13,785,376 $ 4,330,737 $ (77,475) $18,116,760
Exercise of stock
options and stock
purchase warrants.... 59,300 593 9,810 -- -- 10,403
Issuance of common
stock for patent
acquisition.......... 21,334 213 49,787 -- -- 50,000
Net loss.............. -- -- -- (1,774,840) -- (1,774,840)
Translation
adjustments.......... -- -- -- -- (90,104) (90,104)
---------- -------- ----------- ----------- --------- -----------
Balance, September 25,
1993................... 7,892,834 78,928 13,844,973 2,555,897 (167,579) 16,312,219
Exercise of stock
options.............. 156,328 1,564 364,866 -- -- 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................... 8,049,162 80,492 14,409,839 5,551,074 (169,033) 19,872,372
Exercise of stock
options.............. 129,436 1,294 241,248 -- -- 242,542
Issuance of common
stock under employee
stock purchase plan.. 9,560 96 59,057 -- -- 59,153
Stock issuance in
conjunction with
collaboration
agreement............ 56,042 560 323,528 -- -- 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................... 8,244,200 82,442 15,313,672 7,420,593 (145,009) 22,671,698
Issuance of common
stock, net of
issuance costs of
$301,631............. 2,492,000 24,920 49,258,019 -- -- 49,282,939
Exercise of stock
options.............. 294,940 2,950 937,543 -- -- 940,493
Issuance of common
stock under employee
stock purchase plan.. 9,426 94 68,244 -- -- 68,338
Compensation expense
related to issuance
of stock options..... -- -- 79,780 -- -- 79,780
Tax benefit from stock
options exercised.... -- -- 1,250,000 -- -- 1,250,000
Net income............ -- -- -- 4,331,007 -- 4,331,007
Translation
adjustments.......... -- -- -- -- (6,292) (6,292)
---------- -------- ----------- ----------- --------- -----------
Balance, March 30, 1996
(unaudited) ........... 11,040,566 $110,406 $66,907,258 $11,751,600 $(151,301) $78,617,963
========== ======== =========== =========== ========= ===========
</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 SIX MONTHS ENDED
----------------------------------------- ----------------------------
SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
------------- ------------- ------------- ---------- -----------
(UNAUDITED)
Cash Flows from Operating
Activities:
<S> <C> <C> <C> <C> <C>
Net income (loss)....... $(1,774,840) $2,995,177 $1,869,519 $ 797,330 $ 4,331,007
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities--
Depreciation and
amortization........... 424,787 593,519 565,806 264,498 349,976
Compensation expense
related to issuance of
stock options.......... -- -- -- -- 79,780
Changes in assets and
liabilities--
Accounts receivable.... (680,391) (5,738,374) (883,961) 2,553,567 (4,752,660)
Inventories............ 238,727 (387,204) (2,445,327) (780,960) 134,842
Prepaid expenses and
other current
assets................ (21,539) (580,031) (411,442) (709,971) (452,408)
Accounts payable....... 518,306 (131,964) 1,781,387 100,528 (433,247)
Accrued expenses....... 884,779 241,960 525,350 (116,467) 1,578,848
Deferred revenue....... 121,604 27,344 505,765 248,289 465,237
----------- ---------- ---------- ---------- -----------
Net cash provided by
(used in) operating
activities........... (288,567) (2,979,573) 1,507,097 2,356,814 1,301,375
----------- ---------- ---------- ---------- -----------
Cash Flows from Investing
Activities:
Net (purchases) sales of
short-term
investments............ 4,736,921 (79,340) 1,026,844 2,022,357 (1,640,073)
Purchase of property and
equipment, net......... (213,426) (495,159) (802,822) (405,764) (685,712)
Increase in other
assets................. (286,448) (37,579) (193,729) (93,447) (284,495)
----------- ---------- ---------- ---------- -----------
Net cash provided by
(used in) investing
activities........... 4,237,047 (612,078) 30,293 1,523,146 (2,610,280)
----------- ---------- ---------- ---------- -----------
Cash Flows from Financing
Activities:
Borrowings (settlement)
under line of credit... -- 2,311,352 (536,200) (60,620) 183,747
Net proceeds from sale
of common stock........ 10,403 366,430 301,695 102,703 50,291,770
Tax benefit from stock
options exercised.... -- 200,000 280,000 -- 1,250,000
----------- ---------- ---------- ---------- -----------
Net cash provided by
financing activities.... 10,403 2,877,782 45,495 42,083 51,725,517
----------- ---------- ---------- ---------- -----------
Effect of Exchange Rate
Changes on Cash......... 359,645 (94,627) (15,082) 46,156 19,011
----------- ---------- ---------- ---------- -----------
Net Increase (Decrease)
in Cash and Cash
Equivalents............. 4,318,528 (808,496) 1,567,803 3,968,199 50,435,623
Cash and Cash
Equivalents, beginning
of period............... 2,369,978 6,688,506 5,880,010 5,880,010 7,447,813
----------- ---------- ---------- ---------- -----------
Cash and Cash
Equivalents, end of
period.................. $ 6,688,506 $5,880,010 $7,447,813 $9,848,209 $57,883,436
=========== ========== ========== ========== ===========
Supplemental Disclosure
of Cash Flow
Information:
Cash paid during the
period for income
taxes.................. $ 214,072 $1,259,940 $ 182,809 $ 104,480 $ 724,081
=========== ========== ========== ========== ===========
Supplemental Schedule of
Noncash Transactions:
Common stock issued for
patent acquisition..... $ 50,000 $ -- $ -- $ -- $ --
=========== ========== ========== ========== ===========
Preferred stock
investment acquired in
exchange for common
stock.................. $ -- $ -- $ 324,088 $ 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
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(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) Stock Split
On March 25, 1996, the stockholders of the Company approved a two-for-one
stock split of the Common Stock. The stock split has been retroactively
reflected in the accompanying consolidated financial statements and notes for
all periods presented.
(e) 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. Included in cash equivalents at March 30, 1996 is
approximately $4,567,000 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
approximately $6,522,000 and $57,311,000 at September 30, 1995 and March 30,
1996, respectively. 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 approximately $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)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(f) 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, $2,231,000 and $3,355,000 as of September 24, 1994,
September 30, 1995 and March 30, 1996, respectively. This distributor
accounted for 14%, 28% and 20% of product sales for fiscal 1993, 1994 and
1995, respectively and 32% and 20% for the six months ended March 25, 1995 and
March 30, 1996, respectively.
(g) 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, MARCH 30,
1994 1995 1996
------------- ------------- ----------
<S> <C> <C> <C>
Raw materials and work-in-
process........................ $3,258,076 $4,030,275 $4,986,364
Finished goods.................. 1,176,957 2,886,725 1,749,249
---------- ---------- ----------
$4,435,033 $6,917,000 $6,735,613
========== ========== ==========
</TABLE>
Work-in-process and finished goods inventories consist of materials, labor
and manufacturing overhead.
(h) 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>
(i) 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.
(j) 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, 1995 and for the six months ended March 25,
1995 and March 30, 1996 were not significant.
F-8
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(k) 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.
(l) 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.
(m) 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.
(n) 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.
(o) 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 and March 30, 1996, the Company had no instruments requiring disclosure
under SFAS No. 119.
(p) Interim Financial Statements
The accompanying consolidated balance sheet as of March 30, 1996, the
consolidated statements of operations and cash flows for the six months ended
March 25, 1995 and March 30, 1996, and the consolidated statement of
stockholders' equity for the six months ended March 30, 1996 are unaudited,
but, in the opinion of management, have been prepared on a basis substantially
consistent with the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of these interim periods. The results of the six
months ended March 30, 1996 are not necessarily indicative of the results to
be expected for the year ended September 28, 1996.
F-9
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(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 and approximately
$92,000 and $78,000 for the six months ended March 25, 1995 and March 30,
1996, respectively.
(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>
F-10
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
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.
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 1,900,000 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 1,855,004 shares, of which options to purchase
691,638 shares had been exercised. These options vest over a five-year period
and are exercisable at varying dates.
F-11
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The Company's 1990 Nonemployee Director Stock Option Plan (the Directors'
Plan) allows for eligible directors to receive options to purchase 10,000
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 4,000 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 150,000
shares of common stock for issuance under the Directors' Plan. As of September
30, 1995, the Company had granted options to purchase 140,000 shares, of which
options to purchase 28,000 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 1,100,000 options to purchase shares. Pending
stockholder approval, the Company had granted 550,000 options under this plan.
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 and the six months ended March 30, 1996.
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE
OF SHARES PER SHARE
--------- --------------
<S> <C> <C>
Outstanding, September 30, 1992................. 594,826 $ .05-$11.38
Granted....................................... 504,900 2.19- 2.82
Terminated.................................... (328,726) .05- 11.38
Exercised..................................... (27,700) .05- .50
--------- -------------
Outstanding, September 25, 1993................. 743,300 .05- 8.88
Granted....................................... 606,800 1.82- 5.25
Terminated.................................... (26,370) .50- 3.69
Exercised..................................... (156,328) .05- 4.25
--------- -------------
Outstanding, September 24, 1994................. 1,167,402 .05- 8.88
Granted....................................... 746,600 6.19- 9.44
Terminated.................................... (15,200) 1.94- 7.07
Exercised..................................... (129,436) .05- 7.07
--------- -------------
Outstanding, September 30, 1995................. 1,769,366 .05- 9.44
Granted....................................... 120,600 11.50- 23.88
Terminated.................................... (9,120) 2.38- 12.88
Exercised..................................... (288,940) .50- 8.88
---------
Outstanding, March 30, 1996..................... 1,591,906 .05- 23.88
========= =============
Exercisable, March 30, 1996..................... 522,456 $ .05-$ 9.00
========= =============
</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 200,000 shares under the ESP Plan. During fiscal 1995, the Company issued
19,120 shares under the ESP Plan. For the first six months of 1996, the
Company issued 18,852 shares under the ESP Plan. At March 30, 1996, the
Company has 162,028 shares available for purchase under the ESP Plan.
F-12
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(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
$15, 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 $15 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.
(d) Public Offering
On January 26, 1996, the Company completed a secondary public offering of
2,492,000 shares of the Company's Common Stock which resulted in net proceeds
of approximately $49,300,000.
(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 and approximately $66,000 and
$173,000 for the six months ended March 25, 1995 and March 30, 1996,
respectively.
(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, and 405,000 and 192,000 for the six months ended March
25, 1995 and March 30, 1996, 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 and 138,000 and 2,000 for the six
months ended March 25, 1996 and March 30, 1996, respectively. Of these
amounts, approximately $291,000, $463,000 and $82,000 was unpaid as of
September 24, 1994, September 30, 1995 and March 30, 1996, 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
F-13
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
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, and approximately $368,000 and $306,000 for the six months ended
March 25, 1995 and March 30, 1996, respectively. Approximately $189,000,
$351,000 and $490,000 was outstanding at September 24, 1994, September 30,
1995 and March 30, 1996, 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 and
approximately $398,000 and $392,000 for the six months ended March 25, 1995
and March 30, 1996, 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.
(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 21,334
shares of common stock. The Company may be required to make additional
payments of common stock (up to a maximum of 64,000 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 56,042 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
F-14
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
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
=========== =========== =========== ===========
<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>
F-15
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
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>
(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. On December 14, 1995, the litigation was dismissed by the United
States District Court. 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.
F-16
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(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............... .05 .11 .15 .06
<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............... .08 .02 .06 .07
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of FluoroScan Imaging Systems, Inc.:
We have audited the accompanying consolidated balance sheets of FluoroScan
Imaging Systems, Inc. and subsidiary as of December 31, 1994 and 1995, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FluoroScan
Imaging Systems, Inc. and subsidiary at December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
BDO Seidman, LLP
Chicago, Illinois
February 23, 1996
F-18
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.............. $ 4,571,953 $ 5,438,600 $ 5,316,908
Accounts receivable
Trade................................. 1,257,025 1,704,796 2,488,891
Other................................. 113,969 196,067 187,615
Inventories............................ 1,105,450 1,639,505 1,669,386
Prepaid income taxes................... -- 125,000 --
Prepaid expenses....................... 32,708 76,509 67,780
----------- ----------- -----------
Total Current Assets............... 7,081,105 9,180,477 9,730,580
Property, Plant and Equipment, net....... 477,888 588,498 579,639
Other Assets
Deferred tax asset..................... 346,200 13,000 13,000
Miscellaneous.......................... 93,658 164,030 180,030
Receivables............................ 173,830 274,740 242,433
----------- ----------- -----------
$ 8,172,681 $10,220,745 $10,745,682
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable....................... $ 397,060 $ 710,275 $ 713,492
Accrued expenses
Payroll and bonuses................... 28,174 106,062 94,338
Unpaid commissions.................... 201,205 436,107 383,447
Royalties............................. 107,799 75,881 65,474
Income Taxes Payable.................. -- -- 149,000
Other................................. 67,255 32,473 76,373
----------- ----------- -----------
Total Current Liabilities.......... 801,493 1,360,798 1,482,124
----------- ----------- -----------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.0001 par value;
shares authorized 1,000,000; none
issued................................ -- -- --
Common stock, $.0001 par value; shares
authorized 14,000,000; 3,346,039
outstanding as of December 31, 1994;
3,472,519 outstanding as of December
31, 1995 and March 31, 1996........... 335 347 347
Additional paid-in capital............. 9,163,505 9,164,210 9,164,210
Retained Earnings (Deficit)............ (1,783,347) (304,610) 99,001
----------- ----------- -----------
7,380,493 8,859,947 9,263,558
Less deferred compensation............. (9,305) -- --
----------- ----------- -----------
Total Stockholders' Equity......... 7,371,188 8,859,947 9,263,558
----------- ----------- -----------
$ 8,172,681 $10,220,745 $10,745,682
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-19
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
---------------------------------- -----------------------------
1993 1994 1995 MARCH 31, 1995 MARCH 31, 1996
---------- ---------- ----------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales............... $6,927,761 $9,170,505 $13,146,979 $2,490,922 $3,502,034
Cost of Goods Sold...... 2,732,536 3,656,651 5,458,029 1,038,058 1,506,216
---------- ---------- ----------- ---------- ----------
Gross profit............ 4,195,225 5,513,854 7,688,950 1,452,864 1,995,818
Selling, General and
Administrative
Expenses............... 3,493,466 3,720,521 5,832,622 1,020,377 1,412,315
---------- ---------- ----------- ---------- ----------
Operating income........ 701,759 1,793,333 1,856,328 432,487 583,503
---------- ---------- ----------- ---------- ----------
Other Income (Expense)
Other income.......... 410,360 150,439 211,842 50,250 35,175
Litigation expense.... (145,909) -- -- -- --
Interest expense...... (7,098) -- -- -- --
Interest income....... 14,212 120,995 273,567 56,085 58,933
---------- ---------- ----------- ---------- ----------
Net other income........ 271,565 271,434 485,409 106,335 94,108
---------- ---------- ----------- ---------- ----------
Income before income
taxes.................. 973,324 2,064,767 2,341,737 538,822 677,611
Income taxes (benefit).. (485,000) 292,000 863,000 198,200 274,000
---------- ---------- ----------- ---------- ----------
Net Income.............. $1,458,324 $1,772,767 $ 1,478,737 $ 340,622 $ 403,611
========== ========== =========== ========== ==========
Net Income Per Share.... $ 0.52 $ 0.57 $ 0.43 $ 0.10 $ 0.12
========== ========== =========== ========== ==========
Weighted Average Common
Shares and Share
Equivalents
Outstanding............ 2,787,303 3,106,721 3,472,519 3,506,538 3,495,417
========== ========== =========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-20
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
----------------- PAID-IN EARNINGS DEFERRED
SHARES AMOUNT CAPITAL (DEFICIT) COMPENSATION TOTAL
--------- ------ ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, at December 31,
1992................... 2,660,823 $266 $5,261,097 $(5,014,438) $(60,295) $ 186,630
Amortization of deferred
compensation........... -- -- -- -- 13,399 13,399
Net income, 1993........ -- -- -- 1,458,324 -- 1,458,324
--------- ---- ---------- ----------- -------- ----------
Balance, at December 31,
1993................... 2,660,823 266 5,261,097 (3,556,114) (46,896) 1,658,353
Initial public
offering............... 715,216 72 3,999,905 -- -- 3,999,977
Repurchase and
retirement of Common
Stock.................. (30,000) (3) (97,497) -- -- (97,500)
Amortization of deferred
compensation........... -- -- -- -- 37,591 37,591
Net income, 1994........ -- -- -- 1,772,767 -- 1,772,767
--------- ---- ---------- ----------- -------- ----------
Balance, at December 31,
1994................... 3,346,039 335 9,163,505 (1,783,347) (9,305) 7,371,188
Amortization of deferred
compensation........... -- -- -- -- 9,305 9,305
Exercise of stock
warrant................ 126,480 12 (12) -- -- --
Other................... -- -- 717 -- -- 717
Net income, 1995........ -- -- -- 1,478,737 -- 1,478,737
--------- ---- ---------- ----------- -------- ----------
Balance, at December 31,
1995................... 3,472,519 $347 $9,164,210 $ (304,610) -- $8,859,947
Net income, three months
ended March 31, 1996... -- -- -- 403,611 -- 403,611
--------- ---- ---------- ----------- -------- ----------
Balance, at March 31,
1996 (unaudited)....... 3,472,519 $347 $9,164,210 $ 99,001 -- $9,263,558
========= ==== ========== =========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-21
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
---------------------------------- -----------------------------
1993 1994 1995 MARCH 31, 1995 MARCH 31, 1996
---------- ---------- ---------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities
Net income............. $1,458,324 $1,772,767 $1,478,737 $ 340,622 $ 403,611
Adjustments to
reconcile net income
to net cash provided
by operating
activities
Depreciation and
amortization........ 141,364 180,377 138,665 46,262 32,898
Deferred income
taxes............... (500,000) 253,800 333,200 198,200 --
Gain on sale of
assets.............. -- -- (7,500) -- --
Net (increase) decrease
in
Accounts receivable
Trade............... (721,169) (102,563) (447,771) (383,577) (784,095)
Other............... (75,558) (48,844) (82,098) (26,572) 8,452
Other assets......... (32,460) (230,278) (171,282) (29,195) 16,307
Inventories.......... (35,383) (605,510) (534,055) (54,180) (29,881)
Prepaid income
taxes............... -- -- (125,000) -- 125,000
Prepaid expenses..... (10,613) (7,282) (43,801) (14,014) 8,729
Net increase (decrease)
in
Accounts payable..... (18,519) (51,742) 313,215 41,687 3,217
Accrued expenses..... 360,985 (759,422) 246,090 (659) (30,891)
Income taxes
payable............. -- -- -- -- 149,000
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities............. 566,971 401,303 1,098,400 118,574 (97,653)
---------- ---------- ---------- ---------- ----------
Cash Flows from
Investing Activities
Repayment of notes
receivable officers... -- 201,000 -- -- --
Purchase of property,
plant and equipment... (49,766) (395,409) (239,970) (67,842) (24,039)
Sale of property, plant
and equipment......... -- -- 7,500 -- --
---------- ---------- ---------- ---------- ----------
Net cash used in
investing activities... (49,766) (194,409) (232,470) (67,842) (24,039)
---------- ---------- ---------- ---------- ----------
Cash Flows from
Financing Activities
Payment of
reorganization debt... (85,818) (214,892) -- -- --
Initial public offering
proceeds.............. -- 3,999,977 -- -- --
Repurchase and
retirement of common
stock................. -- (97,500) -- -- --
Other.................. -- -- 717 -- --
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities............. (85,818) 3,687,585 717 -- --
---------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
in Cash and Cash
Equivalents............ 431,387 3,894,479 866,647 50,732 (121,692)
Cash and Cash
Equivalents, at
beginning of year...... 246,087 677,474 4,571,953 4,571,953 5,438,600
---------- ---------- ---------- ---------- ----------
Cash and Cash
Equivalents, at end of
year................... $ 677,474 $4,571,953 $5,438,600 $4,622,685 $5,316,908
========== ========== ========== ========== ==========
Supplemental Disclosures
of Cash Flow
Information
Cash paid during the
year for interest... $ 7,098 -- -- -- --
Cash paid during the
year for taxes...... $ 24,811 $ 27,500 $ 677,500 $ 12,500 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION PROVIDED AS OF MARCH 31, 1996 AND THE PERIODS ENDED MARCH 31,
1995 AND 1996 ARE UNAUDITED)
1. SUMMARY OF ACCOUNTING POLICIES
Operations
The Company is a manufacturer and worldwide distributor of low-intensity,
real-time X-ray imaging devices primarily to health care providers and, to a
lesser extent, to industrial and other users, from its facility in Northbrook,
Illinois.
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, FluoroScan International, Inc., which was
incorporated in November, 1995 and operates a branch in Paris, France. All
significant intercompany balances and transactions have been eliminated.
Interim Financial Statements
The financial information as of March 31, 1996 and with respect to the three
months ended March 31, 1995 and 1996 is unaudited. In the opinion of
management, such information contains all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation of the results
for such periods.
Estimates
The consolidated financial statements include estimated amounts and
disclosures based on management's assumptions about future events. Actual
results may differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents. Carrying amounts approximate fair value
because of the short-term maturity of instruments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash instruments and
trade accounts receivable. The Company maintains cash, cash equivalents, and
short-term investments, primarily invested in treasury bills, with various
financial institutions. The Company provides credit, in the normal course of
business, to national and international health care providers. The Company
performs ongoing credit evaluation of its customers and maintains allowances
for potential credit losses, if necessary. As of December 31, 1995, trade
receivables from the Company's distributor for Canada amounted to $89,380 or
approximately 5% of trade receivables. The entire amount was current. As of
March 31, 1996, trade receivables from the Company's distributor for Germany,
Switzerland, and Austria amounted to $156,726 or 6% of trade receivables. All
amounts were current.
Inventories
Inventories, which principally consist of raw materials and assembled parts,
are stated at the lower of cost or market. Cost is determined using the first-
in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated over
estimated useful lives of 5 to 7 years, except leasehold improvements which
are amortized over the lesser of the lease term or the useful life of the
F-23
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PROVIDED AS OF MARCH 31, 1996 AND THE PERIODS ENDED MARCH 31,
1995 AND 1996 ARE UNAUDITED)
property. Straight-line depreciation is used for financial reporting and
amounted to $127,965, $142,786, and $129,360 for 1993, 1994, and 1995,
respectively and $41,609 and $32,898 for the three months ended March 31, 1995
and 1996, respectively. Accelerated methods are used for income tax purposes.
Research and Development
Research and development costs are expensed as incurred. Research and
development costs are included in general and administrative expenses in the
accompanying statements of income and were approximately $298,530 in 1993,
$213,462 in 1994 and $306,110 in 1995 and $68,183 and $78,636 for the three
months ended March 31, 1995 and 1996, respectively.
Advertising
Advertising costs are generally charged to operations in the year incurred
and totaled $17,255 in 1993, $74,547 in 1994, and $198,383 in 1995 and $30,274
and $70,522 for the three months ended March 31, 1995 and 1996, respectively.
Income Taxes
The provision for income taxes includes federal and state income taxes
currently payable and those deferred because of temporary differences between
the financial statement and tax bases of assets and liabilities and the
utilization of net operating losses and tax credit carryovers.
Net Income Per Share
Net income per common share is computed based on the weighted average number
of common shares and common share equivalents outstanding. When dilutive,
stock options and warrants are included as share equivalents using the
treasury stock method.
Reclassifications
Certain reclassifications have been made to prior years to conform to the
presentation used in 1996.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Leasehold improvements........................ $ 342,381 $ 342,381 $ 342,381
Furniture and fixtures........................ 331,414 476,615 499,885
Machinery and equipment....................... 631,315 726,084 726,853
---------- ---------- ----------
1,305,110 1,545,080 1,569,119
Accumulated depreciation...................... 827,222 956,582 989,480
---------- ---------- ----------
$ 477,888 $ 588,498 579,639
========== ========== ==========
</TABLE>
F-24
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PROVIDED AS OF MARCH 31, 1996 AND THE PERIODS ENDED MARCH 31,
1995 AND 1996 ARE UNAUDITED)
3. ROYALTY AGREEMENTS
(a) The Company is the licensee under two license agreements, covering three
patents, with the United States of America as represented by the National
Aeronautics and Space Administration (NASA). The three patents are the Low
Intensity X-ray Imaging patent (which expires in July 1997), Isolation
Transformer patent and High Voltage Power Supply patent (which both expire in
2002). Under the agreements the Company is required to pay NASA a royalty
equal to 4.5% of sales of the licensed components when all three patents are
used and 3.5% of sales of the licensed components when only the High Voltage
Power Supply and Isolation Transformer patents are used. During 1994, the
Company discontinued using the Low Intensity X-ray Imaging patent. The royalty
payments were further reduced since the components associated with this patent
were of a much higher cost than the components in the other two licensed
inventions. Royalty expense was $94,820, $81,320 and $19,372 for 1993, 1994
and 1995, respectively and $5,952 and $6,594 for the three months ended March
31, 1995 and 1996, respectively. The Company suspended payment of royalties in
1987, in accordance with the agreements, due to the alleged infringement of
one of the licensed patents by three unrelated entities. During 1993, the
Company incurred approximately $146,000 in legal and other costs related to
protecting this patent from infringement. Also during 1993, a $300,000
settlement was reached with two of the alleged infringers and is included in
other income. As part of the settlement, the Company granted one of the
infringers a personal, nonassignable, nontransferable and nonexclusive
sublicense, subject to the payment of royalties. Royalties earned under this
sublicense agreement were $97,625, $154,100 and $204,350 in 1993, 1994 and
1995, respectively and $50,250 and $35,175 for the three months ended March
31, 1995 and 1996, respectively, and are included in other income in the
accompanying consolidated statements of income.
(b) On July 1, 1994, the Company and NASA entered into a settlement relating
to suspended royalties. Pursuant to the terms of the settlement agreement, the
Company paid NASA $79,500 in respect of all suspended royalties through March
28, 1994. Additionally, the Company agreed to timely pay 50% of royalties
incurred after March 28, 1994, with the remaining 50% payable either when the
alleged infringement ceases, when NASA files suit against the alleged
infringer or when the license covering the X-ray and gamma ray imaging device
patent expires in 1997. While payment of royalties was suspended, the Company
continued to accrue royalty expense pursuant to the terms of the agreements.
Therefore, as a result of the settlement agreement the Company realized a
settlement gain of approximately $287,900 in 1994, which was recognized as a
reduction of selling, general and administrative expense in 1994. The Company
has accrued 100% of the royalties incurred after March 28, 1994. Suspended
royalties at December 31, 1994 and 1995, and March 31, 1996 were $42,590,
$58,880, and $62,176 respectively.
(c) Pursuant to a consulting agreement, the Company was previously obligated
to pay to QTR Corporation, whose principals are the inventors of the
technology underlying the NASA patents, a royalty of $300 per FluoroScan
device sold that utilizes QTR Corporation's developments. The royalties
incurred by the Company under the QTR Corporation agreement were $37,200 and
$44,400 for 1993 and 1994, respectively. During the 1994 year, the Company
began to utilize alternative technology and ceased payments to QTR
Corporation.
4. LEASES
The Company leases its industrial and office facilities in Northbrook,
Illinois under an operating lease which expires in 1997. The Company is
currently in the process of negotiating an extension to this lease. In 1995,
the Company entered into a three year operating lease agreement for an office
facility in Paris, France. The agreement contains two three-year options,
exercisable at the Company's discretion. Total rent expense for all leases was
$74,289, $78,750 and $103,933 in 1993, 1994 and 1995, respectively and $22,272
and $36,604 for
F-25
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PROVIDED AS OF MARCH 31, 1996 AND THE PERIODS ENDED MARCH 31,
1995 AND 1996 ARE UNAUDITED)
the three months ended March 31, 1995 and 1996, respectively. Minimum future
rent payments required under non-cancellable leases in effect at December 31,
1995 were as follows:
<TABLE>
<S> <C>
1996............................................................ $142,769
1997............................................................ 74,436
1998............................................................ 60,000
--------
Total........................................................... $277,205
========
</TABLE>
5. INCOME TAXES
Provision for income taxes (benefit) was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Current.................. $ 412,000 $ 965,800 $ 799,100 $ 220,000 $274,000
Utilization of net
operating loss
carryforward............ (397,000) (927,600) (269,300) (220,000) --
Deferred................. 397,000 850,800 333,200 198,200 --
Adjustment of valuation
allowance............... (897,000) (597,000) -- -- --
--------- --------- --------- --------- --------
Income taxes (benefit)... $(485,000) $ 292,000 $ 863,000 $ 198,200 $274,000
========= ========= ========= ========= ========
</TABLE>
A reconciliation of income tax (benefit) at the statutory rate to the
Company's effective rate is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ --------------------
1993 1994 1995 1995 1996
--------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income taxes at the
federal statutory rate.. $ 331,000 $ 702,000 $796,000 $ 183,000 $ 230,000
State taxes, net of
federal taxes........... 58,000 124,000 141,000 26,000 32,000
Other.................... 23,000 63,000 (74,000) (10,800) 12,000
Decrease in valuation
allowance............... (897,000) (597,000) -- -- --
--------- --------- -------- --------- ---------
Effective income tax
(benefit)............... $(485,000) $ 292,000 $863,000 $ 198,200 $ 274,000
========= ========= ======== ========= =========
</TABLE>
As shown in the above table, adjustments to the valuation allowance with
respect to deferred tax assets significantly affected the Company's provision
for taxes on income. Taxes on income, net income and net income per common
share would have been as follows had the Company provided taxes on income at a
combined statutory rate of 40%:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Taxes on income............ $389,000 $ 826,000 $ 937,000 $ 216,000 $ 271,000
======== ========== ========== ========= =========
Net income................. 593,994 1,338,860 1,404,737 322,822 406,611
======== ========== ========== ========= =========
Net income per common
share..................... $ 0.21 $ 0.40 $ 0.40 $ .09 $ .12
======== ========== ========== ========= =========
</TABLE>
F-26
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PROVIDED AS OF MARCH 31, 1996 AND THE PERIODS ENDED MARCH 31,
1995 AND 1996 ARE UNAUDITED)
Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1993 1994 1995 1996
---------- -------- ------- ---------
<S> <C> <C> <C> <C>
Loss carryforward........................ $1,197,000 $269,400 -- --
Credit carryforwards..................... -- 76,800 -- --
Less valuation allowance................. (597,000) -- -- --
Other.................................... -- -- 13,000 13,000
---------- -------- ------- -------
Net deferred tax asset................... $ 600,000 $346,200 $13,000 $13,000
========== ======== ======= =======
</TABLE>
No valuation allowances remained at December 31, 1994 or December 31, 1995.
The net change in the valuation allowance for the deferred tax asset was a
decrease of $897,000 and $597,000 for the years ended December 31, 1993 and
1994, respectively, as a result of changes in the Company's assessment of the
realizability of the related deferred tax asset in future years. Other
deferred items consist primarily of temporary differences between the carrying
amount of inventory for financial reporting purposes and the basis used for
income tax purposes.
6. STOCKHOLDERS' EQUITY
In July 1994, the Company completed an initial public offering of 1,000,000
units, each unit consisting of one share of common stock at $6.90 per share
and one warrant at $.10 per warrant. Of the 1,000,000 shares of common stock
offered, 565,216 shares were offered by the Company and 434,784 shares were
offered by stockholders. All of the warrants were offered by the Company. In
addition, the Company granted the underwriter an option, which was exercised,
to purchase up to 150,000 units to cover over-allotments. Proceeds to the
Company from the initial offering and over-allotment, after deducting
commissions and offering expenses paid by the Company, were approximately
$4,000,000.
As described above, the Company issued 1,150,000 warrants. The warrants,
which became exercisable in July 1995 and expire in July 1999, have an
exercise price of $7.00 per warrant. The warrants are subject to redemption at
$.01 per warrant, commencing in July 1996, provided that 30 days written
notice has been provided and the closing bid price of the common stock equals
or exceeds $9.00 per share for ten consecutive trading days.
In connection with the offering, the Company agreed to sell to the
underwriter, for nominal consideration, the right to purchase up to an
aggregate of 100,000 units at $10.50 per unit. The right, which is exercisable
for a period of four years commencing in July 1995, grants the holder certain
piggyback and demand rights with respect to registration under the Securities
Act.
Stock Split and Stock Dividend--On April 15, 1994, the Board of Directors
declared a 1,344-for-1 stock split which became effective on April 22, 1994.
On June 24, 1994 the Company effected a 17.6% stock dividend. All share and
per share data has been restated to reflect the stock split and dividend.
Stock Incentive Plans--The Company has two stock incentive plans, both of
which are active. In April 1994, the Company adopted a stock option plan (the
"1994 Plan") and in June 1995 the Company's stockholders approved a separate
stock option plan (the "1995 Plan"). Both plans provide for the issuance of
incentive stock options at a purchase price approximating the fair market
value of the Company's common shares at the date of the grant (or 110% of such
fair market value in the case of substantial stockholders). The 1994 and 1995
Plans
F-27
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PROVIDED AS OF MARCH 31, 1996 AND THE PERIODS ENDED MARCH 31,
1995 AND 1996 ARE UNAUDITED)
also authorize the Company to grant non-qualified options, stock appreciation
rights, restricted stock and deferred stock awards. A total of 1,000,000
shares of the Company's common stock have been reserved pursuant to the 1994
and 1995 Plans. As of December 31, 1995, there were 498,000 options with
respect to shares of Common Stock outstanding under the 1994 Plan and there
were options with respect to 2,000 shares available for grant under such plan;
there were 168,000 options with respect to shares of Common Stock outstanding
under the 1995 Plan and there were options with respect to 332,000 shares
available for grant under such plan. The following table provides summary
information regarding stock options under the 1994 and 1995 Plans:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1994 1995 1996
----------- ------------- -------------
<S> <C> <C> <C>
Options outstanding at beginning of
period............................... -- 231,000 666,000
Granted............................... 233,000 437,000 206,500
Exercised............................. -- -- --
Cancelled............................. 2,000 2,000 5,000
Options outstanding at end of period.. 231,000 666,000 867,500
Option price range at end of period... $6.19-$6.74 $5.75-$10.125 $5.75-$10.125
Options exercisable at end of period.. 206,200 439,067 671,598
Options available for grant at end of
period............................... 269,000 334,000 132,500
</TABLE>
Directors Stock Option Plan--In August 1994, the employee directors on the
Board of Directors approved the establishment of a stock option plan for non-
employee directors and the granting to the current non-employee directors of
options to purchase an aggregate of 30,000 shares at an exercise price equal
to the fair market value of the common stock on August 20, 1994, all subject
to stockholder approval. In December 1994, the employee directors on the Board
of Directors adopted the 1994 Directors Stock Option Plan, subject to approval
by the stockholders at the 1995 Annual Meeting. Such approval was obtained in
June, 1995. A total of 600,000 shares of the Company's common stock have been
reserved pursuant to such plan. The following table provides summary
information regarding stock options under the Director Plan:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1994 1995 1996
------- ------------- -------------
<S> <C> <C> <C>
Options outstanding at beginning of
period................................... -- 30,000 63,000
Granted................................... 30,000 33,000 --
Exercised................................. -- -- --
Cancelled................................. -- -- --
Options outstanding at end of period...... 30,000 63,000 63,000
Option price range at end of period....... $6.1875 $6.1875-$7.25 $6.1875-$7.25
Options exercisable at end of period...... -- 33,000 33,000
Options available for grant at end of
period................................... 570,000 537,000 537,000
</TABLE>
Stock Redemption--On November 10, 1994, the Company redeemed 30,000 shares
of its common stock from a former officer at a total cost of $97,500. These
shares have been retired.
7. OTHER MATTERS
(a) The Company has entered into employment agreements with two officers and
a key employee, who is not an officer of the Company, that extend at varying
terms through February 1999. Under the terms of these agreements the
individuals involved are entitled to be paid annual salaries in aggregate of
$489,000 plus bonuses.
F-28
<PAGE>
FLUOROSCAN IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PROVIDED AS OF MARCH 31, 1996 AND THE PERIODS ENDED MARCH 31,
1995 AND 1996 ARE UNAUDITED)
(b) In December, 1995, the Board of Directors approved a profit sharing and
401(k) savings plan for all salaried employees and certain groups of hourly
employees. The plan commenced January, 1996 and no contributions were made or
accrued in 1995. For the plan year 1996, the Company will match 20% of
participant contributions to the savings plan, in which Company contributions
are limited to 1% of the participant's eligible earnings. Contributions for
the three months ended March 31, 1996 were $2,600. The Board of Directors may,
at its discretion, change the Company's contribution and limitations on an
annual basis.
(c) In the first quarter of 1996, the Board of Directors adopted an
amendment to the 1995 Plan, subject to approval by the stockholders at the
1996 Annual Stockholders' Meeting. An additional 500,000 shares of the
Company's common stock have been reserved pursuant to this amendment.
F-29
<PAGE>
HOLOGIC, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
OVERVIEW
The following unaudited pro forma combined condensed financial statements
set forth the combined financial position and the combined results of
operations of Hologic, Inc. (Hologic) and FluoroScan Imaging Systems, Inc.
(FluoroScan) assuming the merger will be accounted for using the pooling of
interests method and that the Merger was consummated on March 30, 1996, for
the pro forma balance sheet and as of October 1, 1992, for the pro forma
statements of operations.
For all periods presented in the pro forma statements of operations,
weighted average shares outstanding gives effect to the proposed issuance of
.31069 shares common stock of Hologic in exchange for each outstanding share
of common stock of FluoroScan.
The unaudited pro forma information combines the (i) historical balance
sheets of Hologic as of March 30, 1996 and the historical balance sheet of
FluoroScan as of March 31, 1996 and (ii) the historical statements of
operations of Hologic for the years ended September 25, 1993, September 24,
1994 and September 30, 1995 and for the six months ended March 30, 1996 and
the historical statements of operations of FluoroScan for the years ended
December 31, 1993, 1994 and 1995 and for the six months ended March 31, 1996.
The following pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the financial position or results of
operations which would actually have been reported had the Merger been in
effect during those periods or which may be reported in the future. No
provision has been reflected in the unaudited pro forma combined financial
information for direct expenses related to the Merger, which are expected to
be expensed in the period the transaction is consummated. The pro forma
statements should be read in conjunction with the respective historical
financial statements and notes thereto of Hologic and FluoroScan which have
been included elsewhere herein.
F-30
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL (1) PRO FORMA
--------------------------- --------------------------
FLUOROSCAN
IMAGING COMBINED
HOLOGIC, INC. SYSTEMS, INC. ADJUSTMENTS COMPANY
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.......... $57,883,436 $ 5,316,908 $ 63,200,344
Short-term
investments.......... 4,132,744 -- 4,132,744
Accounts receivable,
net.................. 16,172,161 2,676,506 18,848,667
Inventories........... 6,735,613 1,669,386 8,404,999
Prepaid expenses and
other current
assets............... 2,503,637 67,780 2,571,417
----------- ----------- ------------
Total current
assets............. 87,427,591 9,730,580 97,158,171
----------- ----------- ------------
Property and equipment,
net.................... 1,852,670 579,639 2,432,309
Other assets, net....... 2,206,047 435,463 2,641,510
----------- ----------- ------------
$91,486,308 $10,745,682 $102,231,990
=========== =========== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit........ $ 2,183,150 $ -- $ 2,183,150
Accounts payable...... 3,308,513 713,492 4,022,005
Accrued expenses...... 5,528,095 768,632 6,296,727
Deferred revenue...... 1,848,587 -- 1,848,587
----------- ----------- ------------
Total current
liabilities........ 12,868,345 1,482,124 14,350,469
----------- ----------- ------------
STOCKHOLDERS' EQUITY:
Common stock--Hologic,
Inc.................. 110,406 -- 14,363 (2) 124,769
Common stock--
Fluoroscan Imaging
Systems, Inc......... -- 347 (347)(2) --
Capital in excess of
par value............ 66,907,258 9,164,210 (14,016)(2) 76,057,452
Retained earnings..... 11,751,600 99,001 11,850,601
Cumulative translation
adjustment........... (151,301) -- (151,301)
----------- ----------- ------------
Total stockholders'
equity............. 78,617,963 9,263,558 87,881,521
----------- ----------- ------------
$91,486,308 $10,745,682 $102,231,990
=========== =========== ============
</TABLE>
- --------
(1) The actual balance sheet amounts of Hologic, Inc. and Fluoroscan Imaging
Systems, Inc. are as of March 30, 1996 and March 31, 1996, respectively
(2) Adjusted to reflect the issuance of 1,436,287 shares of common stock of
Hologic, Inc. ($.01 par value per share) in exchange for all of the
outstanding shares of common stock of FluoroScan Imaging Systems, Inc.
F-31
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 25, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL (1) PRO FORMA
--------------------------- -----------
FLUOROSCAN
IMAGING COMBINED
HOLOGIC, INC. SYSTEMS, INC. COMPANY
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Product sales...................... $24,139,565 $6,927,761 $31,067,326
Other revenue ..................... 708,831 -- 708,831
----------- ---------- -----------
24,848,396 6,927,761 31,776,157
----------- ---------- -----------
Costs and Expenses:
Cost of product sales.............. 13,729,012 2,732,536 16,461,548
Research and development........... 3,182,412 298,530 3,480,942
Selling, general and
administrative.................... 8,973,411 3,194,936 12,168,347
Restructuring costs................ 900,000 -- 900,000
----------- ---------- -----------
26,784,835 6,226,002 33,010,837
----------- ---------- -----------
Income (loss) from operations...... (1,936,439) 701,759 (1,234,680)
Other income (expense), net.......... (138,401) 271,565 133,164
----------- ---------- -----------
Income (loss) before income taxes.. (2,074,840) 973,324 (1,101,516)
Benefit for income taxes............. (300,000) (485,000) (785,000)
----------- ---------- -----------
Net income (loss).................. $(1,774,840) $1,458,324 $ (316,516)
=========== ========== ===========
Net loss per Common and Common
Equivalent Share.................... $ (0.03)
===========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding
(2)................................. 9,296,423
===========
</TABLE>
- --------
(1) The actual results of operations of Hologic, Inc. and FluoroScan Imaging
Systems, Inc. are for the years ended September 25, 1993 and December 31,
1993, respectively.
(2) Reflects the Hologic, Inc. two-for-one stock split effected in the form of
a stock dividend on March 25, 1996.
F-32
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 24, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL (1) PRO FORMA
--------------------------- -----------
FLUOROSCAN
IMAGING COMBINED
HOLOGIC, INC. SYSTEMS, INC. COMPANY
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Product sales....................... $37,056,109 $9,170,505 $46,226,614
Other revenue....................... 1,427,634 -- 1,427,634
----------- ---------- -----------
38,483,743 9,170,505 47,654,248
----------- ---------- -----------
Costs and Expenses:
Cost of product sales............... 20,865,075 3,656,651 24,521,726
Research and development............ 3,441,871 213,462 3,655,333
Selling, general and
administrative..................... 10,081,754 3,507,059 13,588,813
----------- ---------- -----------
34,388,700 7,377,172 41,765,872
----------- ---------- -----------
Income from operations.............. 4,095,043 1,793,333 5,888,376
Other income, net..................... 235,134 271,434 506,568
----------- ---------- -----------
Income before income taxes.......... 4,330,177 2,064,767 6,394,944
Provision for income taxes............ 1,335,000 292,000 1,627,000
----------- ---------- -----------
Net income.......................... $ 2,995,177 $1,772,767 $ 4,767,944
=========== ========== ===========
Net income per Common and Common
Equivalent Share Outstanding:
Primary............................. $ 0.49
===========
Fully Diluted....................... $ 0.47
===========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding
(2):
Primary............................. 9,826,115
===========
Fully Diluted....................... 10,119,907
===========
</TABLE>
- --------
(1) The actual results of operations of Hologic, Inc. and FluoroScan Imaging
Systems, Inc. are for the years ended September 24, 1994 and December 31,
1994, respectively.
(2) Reflects the Hologic, Inc. two-for-one stock split effected in the form of
a stock dividend on March 25, 1996.
F-33
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL (1) PRO FORMA
--------------------------- -----------
FLUOROSCAN
IMAGING COMBINED
HOLOGIC, INC. SYSTEMS, INC. COMPANY
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Product sales....................... $41,129,782 $13,146,979 $54,276,761
Other revenue....................... 2,270,068 -- 2,270,068
----------- ----------- -----------
43,399,850 13,146,979 56,546,829
----------- ----------- -----------
Costs and Expenses:
Cost of product sales............... 22,090,963 5,458,029 27,548,992
Research and development............ 4,300,474 198,383 4,498,857
Selling, general and
administrative..................... 12,296,753 5,634,239 17,930,992
Litigation expenses................. 2,533,493 -- 2,533,493
----------- ----------- -----------
41,221,683 11,290,651 52,512,334
----------- ----------- -----------
Income from operations.............. 2,178,167 1,856,328 4,034,495
Other income.......................... 341,352 485,409 826,761
----------- ----------- -----------
Income before income taxes.......... 2,519,519 2,341,737 4,861,256
Provision for income taxes............ 650,000 863,000 1,513,000
----------- ----------- -----------
Net income.......................... $ 1,869,519 $ 1,478,737 $ 3,348,256
=========== =========== ===========
Net income per Common and Common
Equivalent Share:
Primary............................. $ 0.33
===========
Fully Diluted....................... $ 0.32
===========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding
(2):
Primary............................. 10,188,047
===========
Fully Diluted....................... 10,587,139
===========
</TABLE>
- --------
(1) The actual results of operations of Hologic, Inc. and FluoroScan Imaging
Systems, Inc. are for the years ended September 30, 1995 and December 31,
1995, respectively.
(2) Reflects the Hologic, Inc. two-for-one stock split effected in the form of
a stock dividend on March 25, 1996.
F-34
<PAGE>
HOLOGIC, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL (1) PRO FORMA
--------------------------- -----------
FLUOROSCAN
IMAGING COMBINED
HOLOGIC, INC. SYSTEMS, INC. COMPANY
------------- ------------- -----------
<S> <C> <C> <C>
Revenues:
Product sales....................... $32,067,304 $7,380,002 $39,447,306
Other revenue....................... 1,453,397 -- 1,453,397
----------- ---------- -----------
33,520,701 7,380,002 40,900,703
----------- ---------- -----------
Costs and Expenses:
Cost of product sales............... 15,211,781 3,121,295 18,333,076
Research and development............ 3,076,899 78,636 3,155,535
Selling, general and
administrative..................... 9,008,677 3,101,370 12,110,047
Litigation expenses................. 797,819 -- 797,819
----------- ---------- -----------
28,095,176 6,301,301 34,396,477
----------- ---------- -----------
Income from operations.............. 5,425,525 1,078,701 6,504,226
Other income.......................... 625,482 222,062 847,544
----------- ---------- -----------
Income before income taxes.......... 6,051,007 1,300,763 7,351,770
Provision for income taxes............ 1,720,000 494,000 2,214,000
----------- ---------- -----------
Net income.......................... $ 4,331,007 $ 806,763 $ 5,137,770
=========== ========== ===========
Net income per Common and Common
Equivalent Share..................... $0.44
===========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding
(2).................................. 11,734,633
===========
</TABLE>
- --------
(1) The actual results of operations of Hologic, Inc. and FluoroScan Imaging
Systems, Inc. are for the six months ended March 30, 1996 and March 31,
1996, respectively. The FluoroScan Imaging Systems, Inc. results of
operations for the three months ended December 31, 1995 are also included
in the pro forma combined condensed statement of operations for the year
ended September 30, 1995 included on page F-34. Revenues of $3,877,968 and
net income of $403,152 are included in both periods.
(2) Reflects the Hologic, Inc. two-for-one stock split effected in the form of
a stock dividend on March 25, 1996.
F-35
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HOLOGIC, INC.,
FENWAY ACQUISITION CORP.
AND
FLUOROSCAN IMAGING SYSTEMS, INC.
DATED: JULY 18, 1996
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I................................................................ A-1
1.1 The Merger........................................................... A-1
1.2 The Closing.......................................................... A-1
1.3 Actions at the Closing............................................... A-2
1.4 Additional Actions................................................... A-2
1.5 Conversion of Shares................................................. A-2
1.6 No Appraisal Rights.................................................. A-3
1.7 Exchange of Shares................................................... A-3
1.8 Dividends............................................................ A-5
1.9 Options and Warrants................................................. A-5
1.10 Certificate of Incorporation........................................ A-6
1.11 Bylaws.............................................................. A-6
1.12 Directors and Officers.............................................. A-6
1.13 No Further Rights................................................... A-6
1.14 Closing of Transfer Books........................................... A-7
ARTICLE II............................................................... A-8
2.1 Organization and Qualification of the Company........................ A-8
2.2 Capitalization....................................................... A-8
2.3 Subsidiaries......................................................... A-9
2.4 Authorization of Transaction......................................... A-10
2.5 Present Compliance with Obligations and Laws......................... A-10
2.6 No Conflict of Transaction With Obligations and Laws................. A-10
2.7 Reports and Financial Statements..................................... A-11
2.8 Absence of Undisclosed Liabilities................................... A-12
2.9 Absence of Certain Changes........................................... A-12
2.10 Payment of Taxes.................................................... A-14
2.11 Title to Properties; Liens; Condition of Properties................. A-14
2.12 Inventories......................................................... A-15
2.13 Redeemable Common Stock Warrants.................................... A-16
2.14 Intellectual Property Rights........................................ A-16
2.15 Contracts and Commitments........................................... A-17
2.16 Labor and Employee Relations........................................ A-19
2.17 Employee Benefits and ERISA......................................... A-21
2.18 Environmental Matters............................................... A-23
2.19 Permits............................................................. A-24
2.20 Warranty or Other Claims............................................ A-25
2.21 Claims and Legal Proceedings........................................ A-25
2.22 Borrowings and Guarantees........................................... A-26
2.23 Powers of Attorney.................................................. A-26
2.24 Insurance........................................................... A-26
2.25 Government Contracts................................................ A-26
2.26 Corporate Books and Records......................................... A-26
2.27 Finder's Fee........................................................ A-26
2.28 Transactions with Interested Persons................................ A-26
2.29 Absence of Sensitive Payments....................................... A-27
2.30 Disclosure of Material Information.................................. A-27
2.31 Pooling............................................................. A-27
2.32 State Antitakeover Statutes......................................... A-27
2.33 Company Action...................................................... A-28
2.34 Stockholder Action.................................................. A-28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE III.............................................................. A-29
3.1 Organization of Parent and Acquisition Subsidiary.................... A-29
3.2 Capitalization....................................................... A-29
3.3 Authorization of Transaction......................................... A-30
3.4 No Conflict of Transaction With Obligations and Laws................. A-30
3.5 Reports and Financial Statements..................................... A-31
3.6 Absence of Undisclosed Liabilities................................... A-32
3.7 Absence of Certain Changes........................................... A-32
3.8 Finder's Fee......................................................... A-32
3.9 Claims and Legal Proceedings......................................... A-32
3.10 Disclosure of Material Information.................................. A-33
3.11 Parent Action....................................................... A-33
ARTICLE IV............................................................... A-34
4.1 Commercially Reasonable Efforts...................................... A-34
4.2 Notices and Consents................................................. A-34
4.3 Special Meeting, Prospectus/Proxy Statement and Registration
Statement; Fairness Opinion......................................... A-34
4.4 Operation of Business............................................... A-36
4.5 Full Access.......................................................... A-37
4.6 Notice of Breaches................................................... A-38
4.7 Exclusivity.......................................................... A-38
4.8 Agreements from Certain Company Affiliates........................... A-39
4.9 Listing of Merger Shares............................................. A-39
4.10 Indemnification..................................................... A-39
4.11 Officers and Employees.............................................. A-40
4.12 Form 8-K............................................................ A-40
4.13 Tax-Free Merger..................................................... A-40
4.14 Proprietary Information Agreements.................................. A-40
----------------------------------
4.15 Hart-Scott-Rodino...................................................... 40
ARTICLE V................................................................ A-41
5.1 Conditions to Each Party's Obligations............................... A-41
5.2 Conditions to Obligations of the Parent and the Acquisition
Subsidiary.......................................................... A-41
5.3 Conditions to Obligations of the Company............................. A-43
ARTICLE VI............................................................... A-44
6.1 Termination.......................................................... A-44
6.2 Termination by the Parent............................................ A-45
6.3 Termination by the Company........................................... A-45
6.4 Procedure for Termination............................................ A-46
6.5 Effect of Termination and Abandonment................................ A-47
ARTICLE VII.............................................................. A-48
7.1 Fees and Expenses.................................................... A-48
7.2 Notices.............................................................. A-48
7.3 Publicity and Disclosures............................................ A-49
7.4 Entire Agreement..................................................... A-49
7.5 Severability......................................................... A-49
7.6 Assignability........................................................ A-49
7.7 Amendments and Waivers............................................... A-50
7.8 Governing Law; Venue................................................. A-50
7.9 Remedies............................................................. A-50
7.10 Counterparts........................................................ A-51
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.11 Effect of Table of Contents and Headings............................ A-51
7.12 No Third Party Beneficiaries........................................ A-51
7.13 Survival of Representations......................................... A-51
ARTICLE VIII............................................................. A-51
SIGNATURES............................................................... A-54
LIST OF SCHEDULES AND EXHIBITS........................................... A-55
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT entered into as of the 18th day of July, 1996, by and among
Hologic, Inc., a Delaware corporation, with its principal place of business in
Waltham, Massachusetts (the "Parent"), Fenway Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of the Parent, with its principal place
of business in Waltham, Massachusetts (the "Acquisition Subsidiary"), and
FluoroScan Imaging Systems, Inc., a Delaware corporation, with its principal
place of business in Northbrook, Illinois ("the Company"). The Parent, the
Acquisition Subsidiary and the Company are referred to collectively herein as
the "Parties"
WHEREAS, the Parties have agreed that it is in their best interests for the
Acquisition Subsidiary to merge with and into the Company upon the terms and
conditions set forth herein. The Boards of Directors of the Acquisition
Subsidiary and the Company have approved the merger of their respective
companies and have recommended to the respective stockholders of the Acquisition
Subsidiary and the Company that they approve the merger and this Agreement.
WHEREAS, this Agreement contemplates a tax-free merger of the Acquisition
Subsidiary with and into the Company. In such merger, the stockholders of the
Company will receive capital stock of the Parent in exchange for their capital
stock of the Company and thereby continue to participate in the equity and
appreciation of the combined enterprise.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the Parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
----------
Agreement, the Acquisition Subsidiary shall merge with and into the Company
(with such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Acquisition Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Company and
the Acquisition Subsidiary file a certificate of merger in substantially the
form attached hereto as Exhibit A (the "Certificate of Merger") in accordance
---------
with the relevant provisions of the Delaware General Corporation Law ("DGCL"),
with the Secretary of State of the State of Delaware. The Merger shall have the
effects set forth in Section 251 and 259 of the DGCL.
1.2 The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing") shall take place at the offices of Brown, Rudnick,
Freed & Gesmer in Boston, Massachusetts, commencing at 9:00 a.m. local time on
the second business day after the receipt of Requisite Stockholder Approval (as
defined in Section 2.4), provided that on or prior thereto, all the conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby as set forth in Article 5 have been satisfied or waived, or on such other
mutually
A-1
<PAGE>
agreeable later date as soon as practicable after the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (the "Closing Date"); provided, however, that
the Closing Date shall be no later than November 30, 1996.
1.3 Actions at the Closing. At the Closing, subject to the satisfaction
----------------------
or waiver of all of the Conditions set forth in Article 5, not theretofor
satisfied or waived, (a) the Company and the Acquisition Subsidiary shall file
with the Secretary of State of the State of Delaware the Certificate of Merger
and (b) the Parent shall deliver a certificate for the Merger Shares (as defined
below) to American Stock Transfer & Trust Company or other entity reasonably
satisfactory to the Company appointed by the Parent to act as the exchange agent
(the "Exchange Agent") in accordance with Section 1.7.
1.4 Additional Actions. The Surviving Corporation may, at any time after
------------------
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Acquisition
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
--------------------
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, $.0001 par value per share, of the
Company ("Company Shares") issued and outstanding immediately prior to the
Effective Time (other than Company Shares owned by the Parent or the Acquisition
Subsidiary and Company Shares held in the Company's treasury) shall be converted
into and represent the right to receive such number of shares of common stock,
$.01 par value per share, of the Parent ("Parent Common Stock") as is equal to
the Conversion Ratio. The "Conversion Ratio" shall be .31069; provided,
--------
however, that if the Average Market Value (as hereinafter defined) of the Parent
- -------
Common Stock is greater than $50.29, the Conversion Ratio shall equal $15.63
divided by the Average Market Value; and provided, further, that if the Average
-------- -------
Market Value of the Parent Common Stock is less than $30.17, and the Parent so
elects on a timely basis as set forth in Section 6.3(iii) (a "Parent Adjustment
Election"), the conversion ratio shall equal $9.37 divided by the Average Market
Value. If the Average Market Value of the Parent Common Stock is less than
$30.17 and Parent does not make a Parent Adjustment Election, the Conversion
Ratio shall continue to be .31069, subject to the Company's right to terminate
this Agreement as set forth herein. For purposes hereof, the term "Average
Market Value" means the arithmetic average (rounded to the nearest five decimal
places) of the closing price per share of the Parent Common Stock as reported on
the Nasdaq National Market for the ten (10) consecutive trading days ending two
trading days prior to the Closing. Holders of Company Shares shall also have
the right to receive together with each share of Parent Common Stock issued in
the Merger pursuant to this Section 1.5(a), an associated common stock purchase
right ("Parent Purchase Right") pursuant to the Rights Agreement dated as of
December 22, 1992, as amended, between the Parent and the Rights Agent named
therein. References herein to Parent Common Stock issuable in the Merger shall
be deemed to include the associated Parent Purchase Rights.
A-2
<PAGE>
The Conversion Ratio shall at all times be rounded to the nearest fifth
decimal place. The Conversion Ratio shall be subject to equitable adjustment in
the event of any stock split, stock dividend, reverse stock split,
reorganization, recapitalization or similar event affecting the Parent Common
Stock between the date of this Agreement and the Effective Time. Stockholders
of record of the Company as of the Effective Time ("Company Stockholders") shall
be entitled to receive immediately all of the shares of Parent Common Stock into
which their Company Shares were converted pursuant to this Section 1.5(a) (the
"Merger Shares").
(b) No certificates or scrip representing fractional Merger Shares
shall be issued to former Company Stockholders upon the surrender for exchange
of Certificates (as defined below), and such former Company Stockholders shall
not be entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Parent with respect to any
fractional Merger Shares that would otherwise be issued to such former Company
Stockholders. In lieu of any fractional Merger Shares that would otherwise be
issued, each former Company Stockholder that would have been entitled to receive
a fractional Merger Share shall, upon proper surrender of such person's
Certificates representing such fractional Merger Shares, receive cash in an
amount equal to such fractional Merger Share multiplied by the Conversion Ratio
times the Average Market Value. The Merger Shares and the cash to be received
in lieu of fractional Merger Shares are collectively referred to herein as the
"Merger Consideration."
(c) Each Company Share held in the Company's treasury immediately
prior to the Effective Time and each Company Share owned by the Parent or the
Acquisition Subsidiary shall be canceled and retired without payment of any
consideration therefor.
(d) Each share of common stock, $.01 par value per share, of the
Acquisition Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
$.01 par value per share, of the Surviving Corporation.
1.6 No Appraisal Rights. This Agreement provides that the Company
-------------------
Stockholders shall be entitled to notice of the Special Meeting (as defined in
Section 4.3 below). The Company Shares are designated as Nasdaq National Market
securities and the Parent Common Stock is designated as a Nasdaq National Market
security and is contemplated to be so designated at the record date for the
Special Meeting. Therefore, in accordance with Section 262 of the DGCL, no
Company Stockholder shall be entitled to appraisal rights.
1.7 Exchange of Shares.
------------------
(a) Prior to the Effective Time, the Parent shall appoint the Exchange
Agent (or such other Exchange Agent as the parties shall mutually agree) to
effect the exchange for the Merger Consideration of Certificates that,
immediately prior to the Effective Time, represented Company Shares converted
into Merger Shares pursuant to Section 1.5 ("Certificates"). On or before the
Closing Date, the Parent shall deliver to the Exchange Agent, in trust for the
benefit of holders of Certificates, a stock certificate (issued in the name of
the Exchange Agent or its
A-3
<PAGE>
nominee) representing Merger Shares, as described in Section 1.5(a) and
sufficient funds to make cash payments in lieu of fractional Merger Shares, as
described in Section 1.5(b). As soon as practicable after the Effective Time,
the Parent shall cause the Exchange Agent to send a notice and a transmittal
form to each holder of a Certificate (other than those surrendered and paid for
at the Closing) advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent such Certificate in exchange
for the Merger Consideration. Each holder of a Certificate, upon proper
surrender thereof to the Exchange Agent in accordance with the instructions in
such notice, shall be entitled to receive in exchange therefor (subject to any
taxes required to be withheld) the Merger Consideration, without interest,
determined pursuant to Sections 1.5(a) and (b). Until properly surrendered, each
such Certificate shall be deemed for all purposes to evidence only the right to
receive the Merger Consideration determined pursuant to Sections 1.5(a) and (b).
Holders of Certificates shall not be entitled to receive certificates for the
Merger Shares or cash payments to which they would otherwise be entitled until
such Certificates are properly surrendered.
(b) If any Merger Consideration is to be issued or paid in the name of
a person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the issuance and
payment of such Merger Consideration that (i) the Certificate so surrendered
shall be transferable, and shall be properly assigned, endorsed or accompanied
by appropriate stock powers, (ii) such transfer shall otherwise be proper and
(iii) the person requesting such transfer shall pay to the Exchange Agent any
transfer or other taxes payable by reason of the foregoing or establish to the
satisfaction of the Exchange Agent that such taxes have been paid or are not
required to be paid. Notwithstanding the foregoing, neither the Exchange Agent
nor any Party shall be liable to a holder of Company Shares for any Merger
Shares issuable to such holder pursuant to Section 1.5(a) that are delivered to
a public official in accordance with applicable abandoned property, escheat or
similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Parent shall direct the
Exchange Agent to issue in exchange for such lost, stolen or destroyed
Certificate the Merger Shares issuable in exchange therefor pursuant to Section
1.5(a) and to make any cash payment in lieu of a fractional Merger Share
pursuant to Section 1.5(b). The Board of Directors of the Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to give the Parent a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Parent with respect to the Certificate alleged to have been lost,
stolen or destroyed.
(d) The Exchange Agent shall invest the cash portion of the Merger
Consideration as directed by the Parent; provided, however, that all risk of
loss related to such investments shall be borne by the Parent.
(e) Promptly following the date which is six months after the Closing
Date, the Exchange Agent shall return to the Parent all Merger Consideration
(including the proceeds of any investments thereof) in its possession, and the
Exchange Agent's duties shall terminate.
A-4
<PAGE>
Thereafter, each holder of a Certificate may surrender such Certificate to the
Parent and, subject to applicable abandoned property, escheat and similar laws,
receive in exchange therefor the Merger Consideration, without interest,
issuable with respect thereto pursuant to Sections 1.5(a) and (b).
1.8 Dividends. No dividends or other distributions that are payable to
---------
the holders of record of Parent Common Stock as of a date on or after the
Effective Time shall be paid to former Company Stockholders entitled by reason
of the Merger to receive Merger Shares until such holders surrender their
Certificates in accordance with Section 1.7. Upon such surrender, the Parent
shall pay or deliver to the persons in whose name the certificates representing
such Merger Shares are issued any dividends or other distributions that are
payable to the holders of record of Parent Common Stock as of a date on or after
the Effective Time and which were paid or delivered between the Effective Time
and the time of such surrender provided that no such person shall be entitled
receive any interest on such dividends or other distributions.
1.9 Options and Warrants.
--------------------
(a) As of the Effective Time, all (i) options to purchase Company
Shares issued by the Company pursuant to its stock option plans or otherwise
("Options"), whether vested or unvested, and (ii) options to purchase Company
units, each unit ("Unit") consisting of one share of Common Stock and a warrant
to purchase one share of Common Stock ("Unit Options"), whether or not
exercisable, shall be assumed by the Parent. Immediately after the Effective
Time, each Option and Unit Option outstanding immediately prior to the Effective
Time shall be deemed to constitute an option or warrant to acquire, on the same
terms and conditions as were applicable under such Option or Unit Option at the
Effective Time (without giving effect to the Merger), such number of shares of
Parent Common Stock and warrants to purchase shares of Parent Common Stock is
equal to the number of Company Shares and warrants to purchase Company Shares
subject to the unexercised portion of such Option or Unit Option multiplied by
the Conversion Ratio (except as otherwise provided in the applicable instrument,
with any fraction resulting from such multiplication to be paid in cash upon the
exercise of such Option or Unit Option based upon the closing price of Parent
Common Stock on the Nasdaq National Market on the date of exercise). The
exercise price per share of each such assumed Option and Unit Option shall be
equal to the exercise price of such Option or Unit Option immediately prior to
the Effective Time, divided by the Conversion Ratio. The terms, exercisability,
vesting schedule, status as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986 (as amended, the "Code"), if applicable, and all
of the other terms of the Options and Unit Options shall otherwise remain
unchanged. Without limiting the foregoing, for purposes of determining vesting
of the Options and otherwise, employees of the Company will be credited for
their full term during which they were employed by the Company.
(b) As soon as practicable after the Effective Time, the Parent or the
Surviving Corporation shall deliver to the holders of Options and Unit Options
appropriate notices setting forth such holders' rights pursuant to such Options
or Unit Options, as amended by this Section 1.9, and the agreements evidencing
such Options or Unit Options shall continue
A-5
<PAGE>
in effect on the same terms and conditions (subject to the amendments provided
for in this Section 1.9 and such notice).
(c) The Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of the Options and Unit Options, including the warrants
thereunder, assumed in accordance with this Section 1.9. As soon as practicable
after the Effective Time, and in any event within thirty (30) days thereafter,
the Parent shall file a Registration Statement on Form S-8 (or any successor
form) under the Securities Act of 1933, as amended (the "Securities Act") with
respect to all shares of Parent Common Stock subject to Options that may be
registered on a Form S-8, and shall use commercially reasonable efforts to
maintain the effectiveness of such Registration Statement for so long as such
Options remain outstanding.
(d) The Company shall use commercially reasonable efforts to obtain,
prior to the Closing, the consent from each holder of an Option or Unit Option
to the amendment of such Option or Unit Option pursuant to this Section 1.9
(unless such consent is not required under the terms of the applicable
agreement, instrument or plan).
1.10 Certificate of Incorporation. The Certificate of Incorporation of
----------------------------
the Surviving Corporation shall be the Certificate of Incorporation of the
Company as amended and restated in the Certificate of Merger.
1.11 Bylaws. The Bylaws of the Surviving Corporation shall be the same as
------
the Bylaws of the Acquisition Subsidiary immediately prior to the Effective
Time, except that the name of the corporation set forth therein shall be changed
to the name of the Company.
1.12 Directors and Officers. The directors of the Acquisition Subsidiary
----------------------
shall become the directors of the Surviving Corporation as of the Effective
Time. Promptly after the Effective Time, the board of directors of the
Surviving Corporation shall be expanded to a number not to exceed five and Larry
S. Grossman and Arlen L. Issette shall be elected to the Board. The officers of
the Company at the Effective Time shall remain as officers of the Surviving
Corporation after the Effective Time, retaining their respective positions.
1.13 No Further Rights. From and after the Effective Time, no Company
-----------------
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, other than the right to receive
Merger Shares or cash in lieu thereof under Sections 1.5(a) and (b) or as
otherwise provided herein or by law.
1.14 Closing of Transfer Books. At the Effective Time, the stock transfer
-------------------------
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, the Parent or the Exchange Agent, they shall be
canceled and exchanged for Merger Consideration in accordance with Sections
1.5(a) and (b).
A-6
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Company Disclosure Schedule"). The
Company Disclosure Schedule shall be initialed by the Parties and shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article II.
2.1 Organization and Qualification of the Company. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full power and authority to own, lease and
operate its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it. The copies of the Company's Certificate of Incorporation as amended to
date ("Charter"), certified by the Delaware Secretary of State, and of the
Company's Bylaws as amended to date, certified by the Company's Secretary,
copies of which are attached as Schedule 2.1 of the Company Disclosure Schedule,
------------
are, and will be at the Closing, complete and correct. Except as set forth on
Schedule 2.1 of the Company Disclosure Schedule, the Company is duly qualified
- ------------
to do business and in good standing as a foreign corporation in Illinois and
Michigan and it is not required to be licensed or qualified to conduct its
business or own its property in any other jurisdiction, except where the failure
to be so licensed or qualified would not, individually or in the aggregate, have
a material adverse effect on the business, properties, operations, prospectus,
assets, revenues or condition (financial or otherwise) of the Company and its
Subsidiaries (as defined below) on a consolidated basis (a "Company Material
Adverse Effect").
2.2 Capitalization . The authorized capital stock of the Company consists
--------------
of (i) 1,000,000 shares of preferred stock, $.0001 par value, none of which is
issued and outstanding, and (ii) 14,000,000 shares of common stock, $.0001 par
value, of which 4,115,959 shares are issued and outstanding as of July 16, 1996
and no shares are held in the treasury of the Company. All issued and
outstanding Company Shares are, and all Company Shares that may be issued upon
the exercise of Options, the Company's Redeemable Common Stock Warrants, the
Unit Options and the warrants included in the Units, upon issuance in accordance
with the terms and conditions specified in the instruments pursuant to which
they are issuable and upon payment therefor, will be duly authorized and validly
issued, fully paid, nonassessable, free of all preemptive rights. All
outstanding shares of the Company's Common Stock have been issued in compliance
with Federal and applicable state securities laws. Except as set forth on
Schedule 2.2(b) of the Company Disclosure Schedule (including as applicable, the
- ---------------
number of Company Shares subject to each instrument) and the Company' Redeemable
Common Stock Warrants (all of which warrants shall be redeemed or exercised as
of the Effective Time), there are no (i) outstanding or authorized
subscriptions, warrants, options or other rights granted by the Company or
binding upon the Company to purchase or acquire, or preemptive rights with
respect to the issuance or sale of, the capital stock of the Company or which
obligate or may obligate the Company to issue any additional shares of its
capital stock or any securities convertible into or evidencing the right to
subscribe for any shares of its capital stock, (ii) other securities of the
A-7
<PAGE>
Company directly or indirectly convertible into or exchangeable for shares of
capital stock of the Company, (iii) restrictions on the transfer of the
Company's capital stock (other than restrictions under the Securities Act and
state securities laws), (iv) voting rights with respect to the capital stock of
the Company, or (v) stock appreciation, phantom stock or similar rights with
respect to the Company. Schedule 2.2(c) of the Company Disclosure Schedule
---------------
identifies each holder of Options and Warrants, which Options or Warrants (x) do
not by their terms require the holder to accept the assumption by the Parent of
such Options or Warrants pursuant to Section 1.9(a) hereof, or (y) contain terms
and conditions that would result in acceleration of the vesting schedule or
exercise period set forth therein upon the consummation of the Merger.
2.3 Subsidiaries. Schedule 2.3 of the Company Disclosure Schedule sets
------------ ------------
forth for each corporation with respect to which the Company, directly or
indirectly, has the power to vote or direct the voting of sufficient securities
to elect the majority of the directors (a "Subsidiary") (a) its name and
jurisdiction of incorporation, (b) the number of shares of authorized capital
stock of each class of its capital stock, (c) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof and the number of shares held by each such holder, (d) the number of
shares of its capital stock held in treasury, and (e) its directors and
officers. Each Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation.
Except as disclosed in Schedule 2.3 of the Company Disclosure Schedule, each
------------
Subsidiary is duly qualified to conduct business and is in good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to so qualify would not, individually or in the aggregate, have a
Company Material Adverse Effect. Each Subsidiary has all requisite corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. The Company has delivered to the
Parent correct and complete copies of the Charter and Bylaws of each Subsidiary,
as amended to date. All of the issued and outstanding shares of capital stock
of each Subsidiary are duly authorized and validly issued, fully paid,
nonassessable and free of preemptive rights. All shares of each Subsidiary that
are held of record or owned beneficially by either the Company or any Subsidiary
are held or owned free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), claims,
security interests, options, warrants, rights, contracts, calls, commitments,
equities and demands. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Company or any Subsidiary is a
party or which are binding on any of them providing for the issuance,
disposition or acquisition of any capital stock of any Subsidiary. There are no
outstanding stock appreciation, phantom stock or similar rights with respect to
any Subsidiary. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any
Subsidiary. No Subsidiary is in default under or in violation of any provision
of its Charter or Bylaws. The Company does not control directly or indirectly
or have any direct or indirect equity participation in any corporation,
partnership, trust, or other business association which is not a Subsidiary.
2.4 Authorization of Transaction. The Company has all requisite power
----------------------------
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and,
subject to the adoption of this Agreement and the
A-8
<PAGE>
approval of the Merger by a majority of the votes represented by the outstanding
Company Shares entitled to vote on this Agreement and the Merger (the "Requisite
Stockholder Approval"), the performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
2.5 Present Compliance with Obligations and Laws. The Company is not:
--------------------------------------------
(a) in violation of its Charter or Bylaws; (b) in default in the performance of
any obligation, agreement or condition of any debt instrument which (with or
without the passage of time or the giving of notice) affords to any person the
right to accelerate any indebtedness or terminate any right; (c) in default of
or breach of (with or without the passage of time or the giving of notice) any
other contract to which it is a party or by which it or its assets are bound; or
(d) in violation of any law, regulation, administrative order or judicial order,
decree or judgment applicable to it or its business or assets, except where any
violation or default under items (b), (c), or (d) would not, individually or in
the aggregate, have a Company Material Adverse Effect.
2.6 No Conflict of Transaction With Obligations and Laws. Subject to
----------------------------------------------------
compliance with the applicable requirements of the Securities Act, any
applicable state securities laws, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the filing of the Certificate of Merger as
required by the DGCL, and obtaining the consents listed on Schedule 2.6 of the
------------
Company Disclosure Schedule, neither the execution, delivery and performance of
this Agreement, nor the performance of the transactions contemplated hereby,
will: (i) constitute a breach or violation of the Charter or Bylaws of the
Company; (ii) require any consent, waiver, exemption, approval or authorization
of, declaration, filing or registration with, or giving of notice to any person,
court, arbitration tribunal, administrative agency or commission or other or
governmental or regulatory agency or authority; (iii) conflict with or
constitute (with or without the passage of time or the giving of notice) a
breach of, or default under, any debt instrument to which the Company or any
Subsidiary is a party, or give any person the right to accelerate any
indebtedness or terminate, modify or cancel any right; (iv) constitute (with or
without the passage of time or giving of notice) a default under or breach of
any other agreement, instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
assets are bound; (v) result in the creation of any lien or encumbrance upon any
of the assets of the Company or any Subsidiary; (vi) result in a violation of
any law, regulation, administrative order or judicial order, decree or judgment
applicable to the Company or any Subsidiary, or their businesses or assets; or
(vii) invalidate or adversely affect any permit, license or authorization used
in the Company's or any Subsidiary's business, excluding from clauses (iii),
(iv), (v) and (vi) any default or violation which would not, either individually
or in the aggregate, either have a Company Material Adverse Effect or materially
impair or preclude the Company's ability to consummate the Merger or the
transactions contemplated hereby. Except as set forth in Schedule 2.6(b) of the
Company Disclosure
A-9
<PAGE>
Schedule, neither the execution, delivery and performance of this Agreement nor
the performance of the transactions contemplated hereby will give rise to a
right of any party (other than the Company or any Subsidiary) to terminate,
modify or cancel any contract, agreement or other instrument required to be
disclosed in the Company Disclosure Schedule.
2.7 Reports and Financial Statements.
--------------------------------
(a) The Company has previously furnished to the Parent complete and
accurate copies, as amended or supplemented, of its (a) Annual Report on Form
10-KSB for the fiscal years 1994 and 1995, as filed the Securities and Exchange
Commission (the "SEC"), and amendments thereto, (b) proxy statements relating to
all meetings of its stockholders (whether annual or special) since January 1,
1994 and (c) all other reports or registration statements filed by the Company
with the SEC since January 1, 1994 (such annual reports, proxy statements,
registration statements and other filings, together with any amendments or
supplements thereto, are collectively referred herein as the "Company Reports").
The Company Reports constitute all of the documents filed or required to be
filed by the Company with the SEC since January 1, 1994. As of their respective
dates, the Company Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited financial statements and unaudited
interim financial statements of the Company included in the Company Reports
(together, the "Financial Statements") (i) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby (except as
may be indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-QSB under the Exchange Act and
subject to normal recurring year-end adjustments), (iii) fairly present the
consolidated financial condition, results of operations and cash flows of the
Company and the Subsidiaries as of the respective dates thereof and for the
periods referred to therein, and (iv) are consistent in all material respects
with the books and records of the Company and the Subsidiaries. The Company has
also previously furnished to the Parent all documents used in connection with
any offer or sale of securities by the Company since January 1, 1994, which
documents are identified in Schedule 2.7(a) of the Company Disclosure Schedule.
---------------
(b) The balance sheet contained in the Company's Quarterly Report on
Form 10-QSB for the fiscal quarter ended March 31, 1996, including the footnotes
thereto, is sometimes referred to hereinafter as the "Base Balance Sheet."
(c) The books of account of the Company are complete and correct in
all material respects and have been maintained on a consistent basis. The
current books of account and auditor's letters to management of the Company for
the past five (5) years and other significant correspondence from or to such
auditors during such period, if any, have been provided to the Company.
A-10
<PAGE>
2.8 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
2.8 of the Company Disclosure Schedule and except for liabilities and
- ---
obligations arising in connection with this Agreement, neither the Company nor
any Subsidiary has any liabilities or obligations of any nature, whether
absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied
judgments or any leases of personal or real property or unusual or extraordinary
commitments, except (i) the liabilities recorded on the Base Balance Sheet and
the notes thereto, and (ii) the liabilities and obligations incurred since the
date of the Base Balance Sheet in the ordinary course of business and consistent
with past practice that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
2.9 Absence of Certain Changes. Except as disclosed in Schedule 2.9 of
-------------------------- ------------
the Company Disclosure Schedule, since the date of the Base Balance Sheet there
has not been:
(a) any change in the financial condition, working capital, earnings,
reserves, properties, assets, liabilities, business or operations of the Company
or any Subsidiary which change by itself or in conjunction with all other such
changes, whether or not arising in the ordinary course of business has had a
Company Material Adverse Effect;
(b) any material contingent liability incurred by the Company or any
Subsidiary as guarantor or otherwise with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any of the properties
of the Company or any Subsidiary which remains in existence on the date hereof ;
(d) any material obligation or material liability incurred by the
Company or any Subsidiary other than obligations and liabilities incurred in the
ordinary course of business and consistent with past practice;
(e) any material purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of any
material properties or assets of the Company or any Subsidiary, or any equity
interests in or securities of any Subsidiary or any corporation, partnership,
association or other business organization or division thereof, other than in
the ordinary course of business and consistent with past practice;
(f) any damage, destruction or loss, whether or not covered by
insurance, that could have a Company Material Adverse Affect;
(g) any union organization attempts or claim of unfair labor practices
(other than routine internal employee grievances) involving the Company or any
Subsidiary, any change in the compensation payable or to become payable by the
Company or any Subsidiary to any of their respective officers, employees or
agents, or any change in any bonus, pension, or profit sharing payment,
entitlement or arrangement made to or with any of such officers, employees or
agents;
A-11
<PAGE>
(h) any material adverse change with respect to the management
personnel of the Company or any Subsidiary;
(i) any payment or discharge of a material lien, claim, obligation or
liability of the Company or any Subsidiary which was not shown on the Base
Balance Sheet or incurred in the ordinary course of business and consistent with
past practice thereafter;
(j) any obligation or liability incurred by the Company or any
Subsidiary to any of its employees, officers, directors or shareholders or any
loans or advances made by the Company or any Subsidiary to any of their
respective officers, directors or shareholders except normal compensation,
benefits and expense allowances payable in the ordinary course of business
consistent with past practice;
(k) any write-down of the value of any inventory (including write-
downs by reason of shrinkage or mark-down), except for write-downs and write-
offs that are in the aggregate less than $15,000 incurred in the ordinary course
of business and consistent with past practice;
(l) any disposal or lapse of any rights to the use of any trademark,
tradename, patent or copyright, or disposal of or disclosure by the Company or
any of its Subsidiaries to any person other than the Parent or employees of the
Company of any trade secret, formula, process or know-how not theretofor a
matter of public knowledge other than pursuant to confidentiality agreements;
(m) any change in any method of accounting or accounting practice;
(n) any action taken to issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) or
authorize the issuance, sale or delivery of, or redeem or repurchase, any stock
of any class or any other securities or any rights, warrants or options to
acquire any such stock or other securities (except pursuant to the redemption,
conversion or exercise of the Company' Redeemable Common Stock Warrants and
Options and Warrants outstanding on the date hereof), or amend any of the terms
of any such convertible securities or Options or Warrants (except as
contemplated in this Agreement);
(o) any action taken to split, combine or reclassify any shares of its
capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock; or
(p) any agreement, whether in writing or otherwise, to take any
action described in this Section 2.09.
2.10 Payment of Taxes. Each of the Company and the Subsidiaries has duly
----------------
and timely filed all Federal, state, local, and foreign government income,
excise, gross receipts or franchise tax returns, real estate and personal
property tax returns, sales and use tax returns,
A-12
<PAGE>
employee tax and contribution returns, and all other tax returns, reports and
declarations, including valid extensions therefore, or estimated taxes required
to be filed by them, with respect to all applicable taxes ("Tax Returns"),
including without limitation, with respect to all income, profit, franchise,
sales, use, real property, personal property, ad valorem, excise, employment,
social security and wage withholding, severance, stamp, occupation, and windfall
profits taxes, of every kind, character or description, and imposed by any
government or quasi-governmental authority (domestic or foreign), and any
interest or fines, and any and all penalties or additions relating to such
taxes, charges, fees, levies or other assessments ("Taxes"). All of the Tax
Returns are complete and correct in all material respects. All Taxes shown to be
due on each Tax Return have been paid or are being contested in good faith by
the Company (which contest is being diligently pursued and is described on
Schedule 2.10 of the Company Disclosure Schedule). With respect to all other
- -------------
Taxes for which no return is required, or which have not yet accrued or
otherwise become due, to the Company's knowledge adequate provision has been
made in the pertinent financial statements referred to in Section 2.7 above. All
Taxes and other assessments and levies which the Company or any Subsidiary is
required to withhold or collect have been withheld or collected and paid over or
will be paid over to proper governmental authorities as required. Except as set
forth on Schedule 2.10 of the Company Disclosure Schedule, the Tax Returns have
-------------
never been examined by any government entity, including the Internal Revenue
Service and the Illinois Department of Revenue. The Company is not aware of any
intention on the part of any government entity to examine any of the Tax
Returns. No deficiencies have been asserted or assessments made against the
Company or any Subsidiary, nor is the Internal Revenue Service nor any other
taxing authority now asserting or, to the knowledge of the Company or any
Subsidiary, threatening to assert against the Company or any Subsidiary any
deficiency or claim for additional taxes or interest thereon or penalties in
connection therewith. Neither the Company nor any Subsidiary has extended the
time for the filing of any Tax Return or the assessment of deficiencies or
waived any statute of limitations for any year, which extension or waiver is
still in effect. To the Company's knowledge, the provisions for taxes reflected
in the above-mentioned financial statements are adequate, in all material
respects, to cover any tax liabilities of the Company and the Subsidiaries in
respect of their businesses, properties and operations during the periods
covered by said financial statements and all prior periods. Neither the Company
nor any Subsidiary has filed a consent under Section 341(f) of the Code. Neither
the Company nor any Subsidiary has ever been part of an affiliated group filing
consolidated returns, or entered into any tax allocation or tax sharing
agreement, other than by and among each other.
2.11 Title to Properties; Liens; Condition of Properties.
---------------------------------------------------
(a) Neither the Company nor any Subsidiary owns, directly or
indirectly, any real property. The Company has delivered to Parent true,
correct and complete copies of all leases, subleases, rental agreements,
contracts of sale, tenancies or licenses related to any of the real or personal
property used by the Company or any Subsidiary in their respective businesses.
The property reflected on the Base Balance Sheet or purchased by the Company or
any Subsidiary since the date of the Base Balance Sheet (except for such
properties or assets sold since the date of the Base Balance Sheet in the
ordinary course of business and consistent with
A-13
<PAGE>
past practice) includes all property and assets used or required for use in the
Company's and the Subsidiaries' businesses.
(b) Except as specifically disclosed in Schedule 2.11(b) of the
----------------
Company Disclosure Schedule or in the Base Balance Sheet, the Company or a
Subsidiary own outright all of its personal property and all of its leases are
valid, binding and enforceable in accordance with their terms against the
parties thereto, and each such lease is subsisting and no default exists under
any thereof. Neither the Company nor any Subsidiary has received notice that
any party to any such lease intends to cancel, terminate or refuse to renew the
same or to exercise or decline to exercise any option or any right thereunder.
(c) None of the personal property owned or used by the Company or any
Subsidiary is subject to any mortgage, pledge, deed of trust, lien (other than
for taxes not yet due and payable), conditional sale agreement, security title,
encumbrance, or other adverse claim or interest of any kind, except as
specifically disclosed in Schedule 2.11(c) of the Company Disclosure Schedule or
----------------
in the Base Balance Sheet.
(d) Except as otherwise specified in Schedule 2.11(d) of the Company
----------------
Disclosure Schedule:
(i) all buildings, machinery and equipment of the Company or any
Subsidiary are in good condition, working order and repair, normal wear and tear
and excepted, are adequate for the uses to which they are being put, have been
well maintained, conform in all material respects with all applicable
ordinances, regulations and zoning, safety or other laws, and to the knowledge
of the Company do not encroach on property of others; and
(ii) as of the date hereof, neither the Company nor any
Subsidiary has received written notice of or otherwise become aware of any
pending or threatened change of any such ordinance, regulation or zoning, safety
or other law and there is no pending or, to the Company's knowledge, threatened
condemnation of any such property.
2.12 Inventories. All inventories of finished goods and raw materials of
-----------
the Company and the Subsidiaries reflected on the Base Balance Sheet were as of
the date thereof , and those existing at the Closing will be, in all material
respects, of a quality and quantity salable in the ordinary course of the
business of the Company and the Subsidiaries at prevailing market prices without
discounts, except for inventory reserved against in accordance with GAAP.
Purchase commitments for raw materials and parts are not in excess of normal
requirements, and none are at prices materially in excess of current market
prices. Except as set forth in Schedule 2.12 of the Company Disclosure
-------------
Schedule, since the date of the Base Balance Sheet, no inventory items have been
- ---------
sold or disposed of except through sales in the ordinary course of business and
consistent with past practice at prices no less than prevailing market prices,
and in no event less than cost.
2.13 Redeemable Common Stock Warrants. The Company has issued a
--------------------------------
redemption notice with respect to its Redeemable Common Stock Warrants, a copy
of which notice is
A-14
<PAGE>
attached to Schedule 2.13 of the Company Disclosure Schedule. The Company has
-------------
extended the redemption date until July 26, 1996, a copy of the press release
announcing such extension is attached to Schedule 2.13 of the Company Disclosure
-------------
Schedule.
2.14 Intellectual Property Rights.
----------------------------
(a) The Company or the Subsidiaries own or have the right to use all
Intellectual Property Rights (as defined below) necessary to the conduct of
their respective businesses. Schedule 2.14(a) of the Company Disclosure
----------------
Schedule contains a worldwide list of all patents, trade names, registered and
unregistered copyrights, trademarks and service marks, and applications for the
same owned by the Company or any Subsidiary. The Company and/or a Subsidiary
have unencumbered title to the Intellectual Property Rights set forth in
Schedule 2.14(a) which are listed as owned by the Company or any Subsidiary and
- ----------------
such title has not been challenged (pending, or to the knowledge of the Company,
threatened) by others except for the encumbrances listed in such Schedule
--------
2.14(a). No rights or licenses to use Intellectual Property Rights have been
- -------
granted or acquired by the Company or any Subsidiary except those listed in
Schedule 2.14(b) of the Company Disclosure Schedule. Schedule 2.14(c) of the
- ---------------- ----------------
Company Disclosure Schedule lists all licenses, agreements, obligations,
provisions or contracts relating to the Intellectual Property Rights to which
the Company or any Subsidiary is a party or by which the Company or any
subsidiary is bound, except licenses implied by the sale of a product an
perpetual, paid-up licenses for commonly available software programs with a
value of less than $1,000 per copy under which the Company or any subsidiary is
a licensee. Each of the Material Licenses (as defined in Schedule 2.14(c) of
----------------
the Company Disclosure Schedule) and, to the Company's knowledge, (i) each of
the other licenses, agreements, obligations, provisions or contracts listed in
Schedule 2.14(c) is in full force and effect , (ii) neither the Company nor any
- ----------------
Subsidiary is in default under any such instrument, and (iii) there are no
outstanding, or threatened, disputes or disagreements with respect to any such
instrument. Except as listed in Schedule 2.14(d) of the Company Disclosure
----------------
Schedule, to the knowledge of the Company, there have been (i) no claims or
assertions made by others that the Company or any Subsidiary has infringed any
Intellectual Property Rights of others by the sale of products or any other
activity in the preceding five year period and (ii) no infringements by the
Company or any Subsidiary during such period. Except as set forth in Schedule
--------
2.14(e) of the Company Disclosure Schedule, the Company has no knowledge of any
- -------
infringement of Intellectual Property Rights of the Company or any Subsidiary by
others. All such patents, registered trademarks, service marks, and copyrights
owned by the company or any Subsidiary are in good standing and are recorded on
the public record in the name of the Company or a Subsidiary, except for those
failures to be in good standing and so recorded that would not, individually or
in the aggregate, have a Company Material Adverse Effect. True, complete and
correct copies of all material listed in Schedules 2.14(a), 2.14(b), 2.14(c),
------------------------------------
2.14(d) and 2.14(e) of the Company Disclosure Schedule have been delivered or
- -------------------
made available to the Parent. For purposes of this Agreement, "Intellectual
Property Rights" shall mean and include rights relating to patents, trademarks,
service marks, tradenames, copyrights, mask works, inventions, processes, trade
secrets, know-how, confidentiality agreements, consulting agreements, software
and any documentation relating to the manufacture, marketing and maintenance of
products by the Company or any Subsidiary.
A-15
<PAGE>
(b) Schedule 2.14(f) of the Company Disclosure Schedule, sets forth
----------------
all current employees of and technical consultants to the Company or any of its
Subsidiaries who have executed written agreements with the Company or such
Subsidiary that assign to such entity all rights to any inventions,
improvements, discoveries, works of authorship or confidential information
relating to the business of the Company or any Subsidiary. To the Company's
knowledge, no employee of the Company or any Subsidiary has entered into any
agreement that restricts or limits in any way the scope or type of work in which
the employee may be engaged or requires the employee to transfer, assign, or
disclose information concerning his work to anyone other than the Company or any
Subsidiary.
(c) The manner in which the Company or any Subsidiary has
manufactured, packaged, shipped, advertised, labeled and sold its products
complies in all material respects with all the material applicable laws and
regulations pertaining thereto. Neither the Company nor any Subsidiary has
deposited, or is obligated to deposit, any source code regarding its products
into any source code escrows or similar arrangements and neither the Company nor
any Subsidiary is under any contractual or other obligation to disclose the
source code or any other proprietary information included in or relating to its
products.
2.15 Contracts and Commitments.
-------------------------
(a) Except for contracts, commitments, plans, agreements and licenses
described in Schedule 2.15(a) and Schedule 2.16 of the Company Disclosure
---------------- -------------
Schedule (correct and complete copies of which, if written, have been delivered
to the Parent), neither the Company nor any Subsidiary is a party to or subject
to:
(i) any contract or agreement for the purchase of any commodity,
material, equipment or asset, except purchase orders in the ordinary course for
less than $100,000 each, such orders not exceeding in the aggregate $200,000;
(ii) any other contracts or agreements creating any obligations of
the Company or any Subsidiary after the date of the Base Balance Sheet of
$25,000 or more with respect to any such contract or agreement, other than sales
and purchase commitments in the ordinary course of business and consistent with
past practice;
(iii) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product from a
supplier;
(iv) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by the Company or any Subsidiary
(or its successor or assign) within one year after the date hereof;
(v) any contract or agreement for the sale or lease of its
products not made in the ordinary course of business and consistent with past
practice;
A-16
<PAGE>
(vi) any contract with any sales agent or distributor of
products of the Company or any Subsidiary;
(vii) any contract containing covenants limiting the freedom of
the Company or any Subsidiary to compete in any line of business or with any
person or entity;
(viii) any license or franchise agreement (as licensor or
licensee or franchisor or franchisee); or
(ix) any arrangement or obligation with respect to the return of
inventory or merchandise other than on account of a defective condition,
incorrect quantities or missed delivery dates.
(b) Neither the Company nor any Subsidiary is in material default
under any contracts, commitments, plans, agreements or licenses described in
Schedule 2.15 of the Company Disclosure Schedule nor does the Company have
- -------------
knowledge of any termination, cancellation, limitation or modification or change
in any business relationship with any material supplier or customer. For the
purposes hereof, a supplier is material if it accounted for more than $270,000
of the orders of the Company and its Subsidiaries for purchases of raw materials
and other products essential to its manufacturing processes during either of
fiscal year 1994 or 1995. A customer is material if it accounted for more than
$650,000 of the orders of the Company and its Subsidiaries in either fiscal year
1994 or 1995. Except as set forth on Schedule 2.15(b) of the Company Disclosure
----------------
Schedule, the Company together with its Subsidiaries has not had any customer
who accounted, directly or indirectly, for more than five percent (5%) of its
sales during the last two fiscal years and the Company together with its
Subsidiaries has no supplier from whom it has purchased more than five percent
(5%) of the goods and services that it purchased during the last two fiscal
years.
(c) The Company's total backlog of orders (including all accepted and
unfulfilled sales orders) is not materially less than the backlog amount set
forth on Schedule 2.15(c) of the Company Disclosure Schedule, and the aggregate
----------------
of all outstanding purchase orders issued by the Company and the Subsidiaries
(including all contracts or commitments for the purchase by the Company and the
Subsidiaries of materials or other supplies) is not materially more than the
purchase order amount set forth on said Schedule. All such sales and purchase
commitments were made in the ordinary course of business and consistent with
past practice.
2.16 Labor and Employee Relations.
----------------------------
(a) Except as shown on Schedule 2.16(a) of the Company Disclosure
----------------
Schedule, there are no currently effective consulting or employment agreements
or other material agreements with individual consultants or employees to which
the Company or any Subsidiary is a party. Complete and accurate copies of all
such written agreements have been delivered to Parent. Also shown on Schedule
--------
2.16(a) of the Company Disclosure Schedule are the name and
- -------
A-17
<PAGE>
rate of compensation (including all salary, bonus, benefit and compensation) of
each officer and employee of the Company and the Subsidiaries, including all
bonus compensation.
(b) Except as shown on Schedule 2.16(b) of the Company Disclosure
----------------
Schedule, none of the employees of the Company or any Subsidiary is covered by
any collective bargaining agreement with any trade or labor union, employees'
association or similar association. The Company and each Subsidiary has
complied in all material respects with applicable laws, rules and regulations
relating to the employment of labor, including without limitation those relating
to wages, hours, unfair labor practices, discrimination, and payment of social
security and similar taxes. There are no representation elections, arbitration
proceedings, labor strikes, slowdowns or stoppages, material grievances or other
labor troubles pending, or, to the knowledge of the Company, overtly threatened,
with respect to the employees of the Company or any Subsidiary.
(c) There are no complaints against the Company or any Subsidiary
pending or, to the knowledge of the Company, overtly threatened before the
National Labor Relations Board or any similar foreign, state or local labor
agencies, or before the Equal Employment Opportunity Commission or any similar
foreign, state or local agency, by or on behalf of any employee or former
employee of the Company or any Subsidiary.
(d) There is no material contingent liability for severance pay or
similar items as of the date of the Base Balance Sheet not set forth on the Base
Balance Sheet or on Schedule 2.16(d) of the Company Disclosure Schedule. The
----------------
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not trigger any severance pay
obligation under any contract or at law.
(e) The Company has provided to Parent a description of all written
and other material employment policies under which the Company and each
Subsidiary has operated.
(f) Except as disclosed on Schedule 2.16(f) of the Company Disclosure
----------------
Schedule and except where the failure to so be in compliance, individually or in
the aggregate, would not have a Company Material Adverse Effect, the Company and
each Subsidiary is in compliance with all Federal, foreign (as applicable), and
state worker's safety laws and requirements.
(g) Except as disclosed on Schedule 2.16(g) of the Company Disclosure
----------------
Schedule, to the knowledge of the Company, no executive, key employee or group
of employees has any plans to terminate his or her employment with the Company
or any Subsidiary.
(h) Except as disclosed on Schedule 2.16(h) of the Company Disclosure
----------------
Schedule, no salaried or commissioned employee has left the employment of the
Company or any Subsidiary since the date of the Base Balance Sheet.
A-18
<PAGE>
2.17 Employee Benefits and ERISA.
---------------------------
(a) Schedule 2.17(a) of the Company Disclosure Schedule sets forth a
----------------
list of every plan or arrangement relating to employees of the Company or of any
member of a controlled group or affiliated service group (as defined in Code
Section 414(b), (c), (m) and (o)) which includes the Company (an "ERISA
Affiliate") which is:
(i) an employee benefit plan within the meaning of Section 3
of the Employment Retirement Income Security Act of 1974, as amended ("ERISA");
or
(ii) a multiemployer plan within the meaning of Section 3(37)
or 4001(a)(3) of ERISA; or
(iii) a compensation, stock purchase, stock option, stock bonus,
stock appreciation, severance, health, welfare, life, disability or other
benefit plan, fund, program, arrangement or practice which is not covered by
clause (i) or (ii) above.
(Hereinafter, "ERISA Benefit Plan" refers to plans or arrangements under clauses
(i) and (ii) above and "Benefit Plan" refers to plans or arrangements under
clauses (i) - (iii) above.)
(b) There are no agreements or commitments of the Company or any
ERISA Affiliate, whether or not legally binding, to create any additional
Benefit Plan not listed on Schedule 2.17(b). There have been no multiemployer
----------------
plans or defined benefit pension plans covering employees of the Company or an
ERISA Affiliate within the last ten (10) years.
(c) With respect to each ERISA Benefit Plan, the Company has
furnished to Parent complete and accurate copies of each Benefit Plan described
in Schedule 2.17(a), including all amendments thereto. With respect to each
----------------
ERISA Benefit Plan, the Company has also furnished the three most recent
Form 5500s and the most recent Internal Revenue Service determination letter (if
any), plan actuarial report, summary plan description, summary annual report and
employee manual, as well as summaries of material modifications, material
employee communications, and all reports of the Benefit Plan required by ERISA
and the regulations thereunder. The Company has also furnished Parent copies of
any insurance contracts or trust agreements through which any ERISA Benefit Plan
is funded, any custodial or investment contracts relating to assets or benefits
under the Benefit Plan, any contracts relating to record keeping or
administration for the Benefit Plan, and notice of any material adverse change
occurring with respect to any Benefit Plan since the date of the most recently
completed and filed annual report.
(d) Except as set forth on Schedule 2.17(d), with respect to each
----------------
ERISA Benefit Plan which is a pension plan within the meaning of Section 3(2) of
ERISA:
(i) The value of the ERISA Benefit Plan's asset equals or
exceeds the total value of all vested and unvested employee benefits under such
Plan, whether determined on an ongoing basis or termination basis;
A-19
<PAGE>
(ii) the ERISA Benefit Plan meets in all material respects all
applicable requirements of Section 401(a) of the Code; and
(iii) the Base Balance Sheet reflects all accrued but unpaid
liabilities with respect to such ERISA Benefit Plan.
(e) With respect to each Benefit Plan:
(i) each Benefit Plan materially complies currently and has in
all material respects complied in the past, as to form and operation, with the
provisions of all applicable Federal and state laws, such as ERISA and the Code,
including without limitation all requirements regarding discrimination,
disclosure, and continuation coverage (under Section 4980B of the Code); and no
nonexempt "prohibited transaction" (as defined in Section 4975 of the Code or
enumerated in Section 406(a) or (b) of ERISA) has occurred;
(ii) all required government filings, reports, and notices have
been properly and timely made;
(iii) no such Benefit Plan is currently under audit or
investigation by any governmental agency or body;
(iv) there are no actions, suits or claims (other than routine
claims for benefits) pending or threatened against any of the Benefit Plans or
against the assets of any Benefit Plan;
(v) all premiums due in connection with the Benefit Plan and
premiums for life and health insurance and annuity contracts, have been paid in
full when due and, except as specifically disclosed on Schedule 2.17(e) of the
----------------
Company Disclosure Schedule;
(vi) all reports and filings made pursuant to ERISA, including
without limitation all 5500 forms and attachments, summary annual reports, and
participant reports, and any other documents reasonably necessary to enable
Parent to perform its responsibilities with respect to any employee program
subsequent to the Closing, are and shall be available at the offices of the
Company on and immediately after the Closing; and
(vii) except as required by COBRA (Section 4980B of the Code) or
the Family Medical Leave Act, no Benefit Plan provides health or other welfare
benefits to retirees, former employees, or their dependents.
(f) Except as required by COBRA or the Family Medical Leave Act,
neither the Company nor any ERISA Affiliate has made any promises or incurred
any obligation to provide any health or other welfare benefits to any retirees,
former employees, or their dependents.
A-20
<PAGE>
(g) The execution and delivery of this Agreement by the Company and
the consummation of the transactions contemplated hereunder:
(i) do not constitute a nonexempt prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of the Code;
(ii) will not result in any obligation or liability of the
Parent or of the Company to any employee of the Company or any ERISA Affiliate
or to the PBGC in respect of any Benefit Plan.
2.18 Environmental Matters.
---------------------
(a) Except as disclosed in Schedule 2.18(a) of the Company
----------------
Disclosure Schedule, any and all oil, petroleum product, waste oil, hazardous
waste, hazardous substances, toxic substances or hazardous materials used or
generated by the Company or any Subsidiary have always been or are being
generated, used, stored or treated on and at any of the properties or facilities
owned or leased by the Company or any Subsidiary (for the purposes of this
Section, a "Site") in material compliance with Federal, state and local laws,
regulations and ordinances. Copies of any and all filings made or documents
prepared under Title III of the Superfund Amendments and Reauthorization Act of
1986 and applicable state or local statutes or laws have been provided to
Parent.
(b) Except as disclosed in Schedule 2.18(b) of the Company
----------------
Disclosure Schedule, no petroleum product, oil, hazardous waste, hazardous
substances, toxic substances or hazardous materials used or generated by the
Company have ever been, are being, are intended to be or are threatened with
being spilled, released, discharged, disposed, placed, leaked, or otherwise
caused to become located in the air, soil or water in, under or upon a Site. The
Company has provided Parent with copies of all notices filed pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act or
comparable state law, including without limitation any reports, whether oral or
written, made to the National Response Center, or other agencies.
(c) Except as disclosed in Schedule 2.18(c) of the Company
----------------
Disclosure Schedule, no petroleum, oil, hazardous substances or hazardous waste
have ever been shipped by or for the Company or any Subsidiary to other sites or
facilities for treatment, storage or disposal, and neither the Company nor any
Subsidiary has received any notice that any sites or facilities to which any
such wastes have been shipped or sent to are subject to or threatened to become
subject to any governmental response action or clean up order. The Company has
provided Parent with copies of all manifests, bills of lading and other receipts
or evidence documenting disposal or recycling of hazardous substances relating
to operations of the Company and the Subsidiaries.
(d) Except as disclosed in Schedule 2.18(d) of the Company
----------------
Disclosure Schedule, to the Company's knowledge, all hazardous materials and
toxic substances have been
A-21
<PAGE>
shipped by the Company and the Subsidiaries in accordance with all applicable
Federal, state and local laws, regulations and ordinances, including The
Hazardous Materials Transportation Act, the regulations of the Department of
Transportation, and any corresponding state or local statute and regulations
adopted pursuant to said act.
(e) All underground tanks and other underground storage facilities
located at any Site are disclosed in Schedule 2.18(e) of the Company Disclosure
----------------
Schedule and copies of all notifications made to Federal, state or local
authorities pursuant to the Resource Conservation and Recovery Act a similar
state or local law relating to underground storage tanks have been provided to
Parent. As of the date hereof, to the Company's knowledge, none of such
underground tanks and other underground storage facilities are in violation of
any Federal, state or local environmental law, regulation or ordinance.
(f) Except as disclosed in Schedule 2.18(f) of the Company
----------------
Disclosure Schedule, all wells, water discharges and other water diversions on
any Site are properly registered and/or permitted under, and copies of such
permits have been provided to Parent, and do not violate in any material
respect, any applicable Federal, state or local law, regulation or ordinance.
(g) Except as disclosed in Schedule 2.18(g) of the Company
----------------
Disclosure Schedule, the Company and each Subsidiary has all necessary and
applicable air permits and licenses, and has properly registered (for air
pollution control purposes) all air emitting devices used by and activities
conducted by it, as required by applicable Federal, foreign, state or local law,
regulation or ordinance. Copies of all such permits have been provided to
Parent.
(h) Except as disclosed on Schedule 2.18(h) of the Company
----------------
Disclosure Schedule, all asbestos insulated equipment or areas on any Site are
in material compliance with all applicable Federal, foreign, state and local
laws, current regulations, and ordinances.
(i) For purposes of this section, "hazardous waste", "hazardous
substances", "hazardous material", "oil", "petroleum", "toxic substances",
"manifest", and "response action" shall have the meaning set forth in the
Resource Conservation and Recovery Act, The Comprehensive Environmental
Response, Compensation and Liability Act, The Hazardous Materials Transportation
Act, The Federal Water Pollution Control Act, The Toxic Substances Control Act,
and corresponding state and local statutes, and ordinances and any amendments,
or successor legislation to such Acts, or as currently defined in any Federal,
state or local regulations adopted pursuant to such Acts.
2.19 Permits. The Company and each Subsidiary holds all licenses,
-------
permits, registrations, orders, authorizations, approvals and franchises which
are required to permit it to conduct its businesses as presently conducted,
except where the failure to hold such licenses, permits, registrations, orders,
authorizations, approvals or franchises would not, individually or in the
aggregate, have a Company Material Adverse Effect. All such licenses, permits,
registrations, orders, authorizations, approvals and franchises are listed on
Schedule 2.19 of the Company Disclosure Schedule and are now, and will be after
- -------------
the Closing, valid and in full force
A-22
<PAGE>
and effect, and Parent shall have full benefit of the same, except where the
failure to have the benefit of any such license, permit, registration, order,
authorization, approval or franchise would not, individually or in the
aggregate, have a Company Material Adverse Effect. Neither the Company nor any
Subsidiary has received any notification of any asserted present failure (or
past and unremedied failure) by it to have obtained any such license, permit,
registration, order, authorization, approval or franchise.
2.20 Warranty or Other Claims. Except as disclosed on Schedule 2.20 of the
------------------------ -------------
Company Disclosure Schedule, no product manufactured, sold, leased or delivered
by the Company or any Subsidiary is subject to any guaranty, warranty, right of
return or other indemnity beyond the applicable standard terms and conditions of
sale or lease, which have been provided to the Parent. Schedule 2.20 of the
-------------
Company Disclosure Schedule sets forth the aggregate expenses incurred by the
Company and the Subsidiaries in fulfilling their obligations under their
guaranty, warranty, right of return and indemnity provisions during each of the
fiscal years and the interim period covered by the Financial Statements; and the
Company knows of no reason why such expenses should significantly increase as a
percentage of sales in the future. Except as set forth in Schedule 2.20 of the
-------------
Company Disclosure Schedule, there are no existing or, to the knowledge of the
Company threatened claims, or any facts upon which a claim could be based,
against the Company or any Subsidiary for services or merchandise which are
defective or fail to meet any service or product warranties. Except as set forth
in Schedule 2.20 of the Company Disclosure Schedule, no claim has been asserted
-------------
against the Company or any Subsidiary for renegotiation or price redetermination
of any business transaction, and the Company has no knowledge of any facts upon
which any such claim could be based. The Company's and the Subsidiaries'
products are free from known significant defects and to the knowledge of the
Company, conform to the specifications, documentation and sample demonstration
furnished to the Company's and the Subsidiaries' customers and to Parent.
2.21 Claims and Legal Proceedings. Except for matters described in
----------------------------
Schedule 2.21 of the Company Disclosure Schedule, there are no claims, actions,
- -------------
suits, arbitration's, proceedings or investigations pending (or, to the
knowledge of the Company, threatened) against the Company or any Subsidiary, and
there are no outstanding court orders, court decrees, or court stipulations to
which the Company or any Subsidiary is a party or by which any of their assets
are bound, any of which (a) question this Agreement or affect the transactions
contemplated hereby, or (b) materially restrict the present business properties,
operations, prospects, assets, revenues or condition (financial or otherwise) of
the Company or any Subsidiary, or (c) would, individually or in the aggregate
have a Company Material Adverse Effect or materially impair or preclude the
Company's ability to consummate the Merger or the other transactions
contemplated hereby. The Company has no reason to believe that any such claim,
action, suit, arbitration, proceeding or investigation may be brought against
the Company or any Subsidiary.
2.22 Borrowings and Guarantees. Except as shown on Schedule 2.22 of the
------------------------- -------------
Company Disclosure Schedule, there are no agreements and undertakings pursuant
to which the Company or any Subsidiary (a) is borrowing or is entitled to borrow
any money, (b) is lending or has committed itself to lend any money, or (c) is a
guarantor or surety with respect to the
A-23
<PAGE>
obligations of any person. Complete and accurate copies of all such written
agreements have been delivered to Parent and are attached to Schedule 2.21.
-------------
2.23 Powers of Attorney. Neither the Company nor any Subsidiary has any
------------------
outstanding powers of attorney.
2.24 Insurance. Schedule 2.24 of the Company Disclosure Schedule lists
--------- -------------
all insurance policies in force on the date hereof covering the businesses,
properties and assets of the Company and the Subsidiaries and all outstanding
claims against such policies. All such policies are currently in effect.
Except as set forth on Schedule 2.24 of the Company Disclosure Schedule, neither
-------------
the Company nor any Subsidiary has received notice of the cancellation of any
such insurance in effect on the date hereof.
2.25 Government Contracts. Neither the Company nor any Subsidiary has
--------------------
ever had a contract or subcontract terminated for default and has never been
determined to be nonresponsible by any agency of the United States government.
Except as set forth on Schedule 2.25 of the Company Disclosure Schedule, neither
the Company nor any Subsidiary has any outstanding agreements, contracts or
commitments that required to obtain or maintain a government security clearance.
2.26 Corporate Books and Records. The minute books and stock ledgers of
---------------------------
the Company, copies of which have been made available for inspection by Parent,
accurately record all material action taken by the Company's stockholders, board
of directors and committees thereof.
2.27 Finder's Fee. Except for Rodman & Renshaw, Inc. neither the Company
------------
nor any Subsidiary has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to a fee or any commission the receipt of which is conditioned upon
the consummation of the Merger. Schedule 2.27 of the Company Disclosure
-------------
Schedule describes the maximum fee payable to Rodman & Renshaw, Inc.
2.28 Transactions with Interested Persons. Except as disclosed in
------------------------------------
Schedule 2.28 of the Company Disclosure Schedule, no officer, supervisory
- -------------
employee, director or stockholder of the Company or any Subsidiary, or their
respective spouses or children, (i) owns, directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director of, any customer, competitor or supplier of the Company or any
Subsidiary or any organization which has a material contract or arrangement with
the Company or any Subsidiary, or (ii) has any contract or agreement with the
Company or any Subsidiary other than as disclosed on a schedule hereto, and all
such agreements are, except as noted on such schedule, on arms-length terms.
2.29 Absence of Sensitive Payments. Neither the Company, any Subsidiary,
-----------------------------
nor to the knowledge of the Company, any of the Company's or any Subsidiary's
directors, officers, agents, stockholders or employees, on behalf of the Company
or any Subsidiary:
A-24
<PAGE>
(a) has made or has agreed to make any contributions, payments or
gifts of funds or property to any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or gift was or
is illegal under the laws of the United States, any state thereof, or any other
jurisdiction (foreign or domestic);
(b) has established or maintained any unrecorded fund or asset for
any purpose, or has made any false or artificial entries on any of its books or
records for any reason; or
(c) has made or has agreed to make any contribution or expenditure,
or has reimbursed any political gift or contribution or expenditure made by any
other person to candidates for public office, whether Federal, state or local
(foreign or domestic) where such contributions were or would be a violation of
applicable law.
2.30 Disclosure of Material Information. No representation or warranty by
----------------------------------
the Company contained in this Agreement, and no statement contained in the
Company Disclosure Schedule or any other document, certificate or other
instrument delivered to or to be delivered by or on behalf of the Company
pursuant to this Agreement contains or will contain any untrue statement of a
material fact or omits, or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
2.31 Pooling. To the knowledge of the Company, neither the Company nor
-------
any Company Affiliate (as defined in Section 2.33(d) below) has through the date
of this Agreement taken or agreed to take any action that would prevent the
Company and the Parent from accounting for the business combination to be
entered by one Merger as a "pooling of interests" in conformity with GAAP.
2.32 State Antitakeover Statutes. The Company has granted all approvals
---------------------------
and taken all other steps necessary to exempt the Merger and the other
transactions contemplated hereby (including, without limitation, the execution
and deliver to the Parent of the Stockholder Letter Agreements (as defined
below)) from the requirements and provisions of Section 203 of the DGCL and any
other applicable state antitakeover statute or regulation such that none of the
provisions of such Section 203 or any other "business combination,"
"moratorium," "control share" or other state antitakeover statute or regulation
(i) prohibits or restricts the Company's ability to perform its obligations
under this Agreement or its ability to consummate the Merger and the other
transactions contemplated hereby, (ii) would have the effect of invalidating or
voiding this Agreement, any provision hereof or any Stockholder Letter
Agreement, or (iii) would subject the Parent or the Acquisition Subsidiary to
any material impediment or condition in connection with the exercise of their
respective rights under this Agreement.
2.33 Company Action.
--------------
(a) The Board of Directors of the Company, at a meeting duly called
and held, has by the unanimous vote of all directors present (i) determined that
the Merger is fair and
A-25
<PAGE>
in the best interests of the Company and its stockholders, (ii) approved the
Merger in accordance with the provisions of the DGCL, and (iii) directed that
this Agreement and the Merger be submitted to the Company Stockholders for their
approval and resolved to recommend that Company Stockholders vote in favor of
the approval of this Agreement and the Merger.
(b) The Company has received the opinion of Rodman & Renshaw, Inc.,
dated of recent date, satisfactory to the Company and its Board of Directors to
the effect that the terms of the Merger are fair to the Company Stockholders
from a financial point of view (the "Rodman Opinion").
(c) The Company has received a letter from BDO Seidman, LLP with
respect to the absence of certain attributes of the Company which would preclude
the Merger from being treated as a "pooling of interests" for accounting
purposes. A copy of such letter has been previously furnished to the Parent.
(d) On or prior to the date hereof, the Company shall have delivered
to the Parent the written agreement of all executive officers, directors and all
other persons or entities who are at such time "affiliates" of the Company for
purposes of Rule 145 under the Securities Act, to the extent such persons or
entities own Company Shares (the "Company Affiliates") substantially in the form
attached hereto as Exhibit B (an "Affiliate Agreement"). Schedule 2.33 of the
--------- -------------
Company Disclosure Schedule identifies all persons or entities who or which are
as of the date hereof Company Affiliates.
(e) The Company has received a letter from M.H. Meyerson & Co., Inc.
("Meyerson") regarding certain obligations of the Company pursuant to its prior
underwriting agreement with Meyerson. A copy of such letter has been previously
furnished to the Parent.
2.34 Stockholder Action.
------------------
(a) On or prior to the date hereof, each of Larry S. Grossman and
Arlen L. Issette has entered into an option agreement with the Parent in
substantially the form attached hereto as Exhibit C pursuant to which Mr.
---------
Grossman and Mr. Issette grant the Parent an option, under certain circumstances
whereby this Agreement is terminated and the Merger does not take place as
contemplated herein, to purchase up to all Company Shares owned by them at the
Conversion Ratio.
(b) On or prior to the date hereof, each of Larry S. Grossman and
Arlen L. Issette has delivered to the Parent a letter substantially in the form
attached hereto as Exhibit D and Exhibit E, respectively, pursuant to which
----------
Mr. Grossman and Mr. Issette shall have agreed to vote all Company Shares owned
by them or over which they have voting control, including Company Shares owned
by John Tauber and Kevin Hughes, in favor of the Merger and this Agreement and
irrevocably grant a proxy, coupled with an interest, to the Parent or its
designee to vote such Company Shares in favor of this Agreement the Merger (the
"Stockholder Letter Agreements").
A-26
<PAGE>
(c) On or prior to the date hereof Larry S. Grossman and Arlen L.
Issette have entered into employment agreements with the Surviving Corporation
and the Parent in substantially the form of Exhibit F and Exhibit G
--------- ---------
respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
ACQUISITION SUBSIDIARY
Each of the Parent and the Acquisition Subsidiary represents and warrants to
the Company as follows:
3.1 Organization of Parent and Acquisition Subsidiary.. Each of the
-------------------------------------------------
Parent and the Acquisition Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power to own or lease its properties and to conduct its business in
the manner and in the places where such properties are owned or leased or such
business is conducted by it. The Company owns all of the issued and outstanding
capital stock of the Acquisition Subsidiary. The Acquisition Subsidiary was
formed solely for the purpose of the Merger and engaging in the transactions
contemplated hereby. Except for obligations or liabilities incurred in
connection with its incorporation or the transactions contemplated hereby, The
Acquisition Subsidiary has not incurred, directly or indirectly through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business or activities of any kind whatsoever or entered into any agreements or
arrangements with any person or entity. The copies of the Parent's and the
Acquisition Subsidiaries Certificate of Incorporation as amended to date,
certified in each case by the Delaware Secretary of State, and of the Parent's
and the Acquisition Subsidiary's Bylaws as amended to date, certified by their
respective Secretary, copies of which have been delivered to the Company, are,
and will be at the Closing, complete and correct.
3.2 Capitalization. The authorized capital stock of the Parent consists
--------------
of (i) 1,622,685 shares of preferred stock, $.01 par value, none of which are
outstanding, and (ii) 30,000,000 shares of common stock, $.01 par value, of
which 11,310,750 shares were issued and outstanding as of July 16, 1996 and no
shares were held in treasury of the Parent. Except as set forth on Schedule 3.2
------------
of the Parent's disclosure schedule, as of July 16, 1996 there were no
(i) outstanding or authorized subscriptions, warrants, options or other rights
granted by the Parent or binding upon the Parent to purchase or acquire, or
preemptive rights with respect to the issuance or sale of, the capital stock of
the Parent or which obligate or may obligate the Parent to issue any additional
shares of its capital stock or any securities convertible into or evidencing the
right to subscribe for any shares of its capital stock, (ii) other securities of
the Parent directly or indirectly convertible into or exchangeable for shares of
capital stock of the Parent, (iii) restrictions on the transfer of the Parent's
capital stock (other than restrictions under the Securities Act and state
securities laws), (iv) voting rights with respect to the capital stock of the
Company, or (v) stock appreciation, phantom stock or similar rights with respect
to the Company. Each share of Parent Common Stock is, and each share of Parent
Common Stock to be issued at the Effective Time will be, accompanied by one
Parent Purchase Right. All of the
A-27
<PAGE>
issued and outstanding shares of Parent Common Stock are validly issued, fully
paid and nonassessable, are free of all preemptive rights and were issued in
compliance with Federal and applicable state securities laws. All of the Merger
Shares will be, when issued in accordance with this Agreement, duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights.
There are not authorized or outstanding any options, warrants, calls, rights,
commitments or any other agreements of any character to which the Acquisition
Subsidiary is a party or by which it is bound requiring it to issue, transfer,
sell, purchase, redeem or acquire any shares of capital stock or any securities
or rights convertible into, exchangeable for, or evidencing the right to
subscribe for or acquire, any shares of capital stock of Acquisition Subsidiary.
3.3 Authorization of Transaction. Each of the Parent and the Acquisition
----------------------------
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the performance of this Agreement and the consummation by
the Parent and the Acquisition Subsidiary of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Parent and the Acquisition Subsidiary. This Agreement has
been duly and validly executed and delivered by the Parent and the Acquisition
Subsidiary and constitute valid and binding obligations of the Parent and the
Acquisition Subsidiary, enforceable against them in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
3.4 No Conflict of Transaction With Obligations and Laws. Subject to
----------------------------------------------------
compliance with the applicable requirements of the Securities Act, any
applicable state takeover or securities laws, the Exchange Act, the Nasdaq
National Market and the filing of the Certificate of Merger and any other
documents as required by the DGCL, neither the execution, delivery and
performance of this Agreement, nor the performance of the transactions
contemplated hereby, will: (i) constitute a breach or violation of the Charter
or Bylaws of the Parent or the Acquisition Subsidiary; (ii) require any consent,
waiver, exemption, approval or authorization of, declaration, filing or
registration with, or giving of notice to any person, court, arbitration
tribunal, administrative agency or commission or other or governmental or
regulatory agency or authority (iii) conflict with or constitute (with or
without the passage of time or the giving of notice) a breach of, or default
under, any debt instrument to which the Parent (including any
A-28
<PAGE>
subsidiary of the Parent), the Acquisition Subsidiary is a party, or give any
person the right to accelerate any indebtedness or terminate, modify or cancel
any right; (iv) constitute (with or without the passage of time or giving of
notice) a default under or breach of any other agreement, instrument or
obligation to which the Parent (including any subsidiary of the Parent), the
Acquisition Subsidiary is a party or by which the Parent (including any
subsidiary of the Parent) or the Acquisition Subsidiary or any of their assets
are bound; (v) result in the creation of any lien or encumbrance upon any of the
assets of the Parent (including any subsidiary of the Parent) or the Acquisition
Subsidiary; (vi) result in a violation of any law, regulation, administrative
order or judicial order, decree or judgment applicable to the Parent (including
any subsidiary of the Parent) or the Acquisition Subsidiary, or their businesses
or assets; or (vii) invalidate or adversely affect any permit, license or
authorization used in the Parent's (including any subsidiary of the Parent) or
the Acquisition Subsidiary's business, excluding from clauses (ii) through
(vii) consents, waivers, exemptions, approvals or authorizations, declarations,
filings or registrations, notices, conflicts, breaches, defaults, liens or
encumbrances, or violations which would not, either individually or in the
aggregate, either have a material adverse effect on the business, properties,
operations, prospectus, assets, revenues or condition (financial or otherwise)
of the Parent and its subsidiaries on a consolidated basis (a "Parent Material
Adverse Effect") or materially impair or preclude the Parent's or the
Acquisition Subsidiary's ability to consummate the Merger or the transactions
contemplated hereby.
3.5 Reports and Financial Statements.
--------------------------------
(a) The Parent has previously furnished to the Company complete and
accurate copies, as amended or supplemented, of its (a) Annual Report on Form
10-K for the fiscal years 1994 and 1995, as filed the SEC, and amendments
thereto, (b) proxy statements relating to all meetings of its stockholders
(whether annual or special) since January 1, 1994 and (c) all other reports or
registration statements, other than Registration Statements of Form S-8, filed
by the Parent with the SEC since January 1, 1994 (such annual reports, proxy
statements, registration statements and other filings, together with any
amendments or supplements thereto, are collectively referred herein as the
"Parent Reports"). The Parent Reports constitute all of the documents filed or
required to be filed by the Parent with the SEC since January 1, 1994, other
than any Registration Statement on Form S-8. As of their respective dates, the
Parent Reports did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated audited financial statements and consolidated
unaudited interim financial statements of the Parent included in the Parent
Reports (together, the "Parent Financial Statements") (i) comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto, and
in the case of quarterly financial statements, as permitted by Form 10-Q under
the Exchange Act and subject to normal recurring year-end adjustments),
(iii) fairly present the consolidated financial condition, results of operations
and cash flows of the Parent and each of its subsidiaries as of the respective
dates thereof and for the periods referred to therein, and (iv) are consistent
in all material respects with the books and records of the Parent.
(b) The consolidated balance sheet contained in the Parent's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 1996,
including the footnotes thereto, is sometimes referred to hereinafter as the
"Parent Base Balance Sheet."
3.6 Absence of Undisclosed Liabilities. Except for liabilities and
----------------------------------
obligations arising in connection with this Agreement, the Company, on a
consolidated basis, has no liabilities or obligations of any nature, whether
absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied
judgments or any leases of personal or real property or unusual or extraordinary
commitments, except (i) the liabilities recorded on the Parent Base Balance
A-29
<PAGE>
Sheet and the notes thereto, and (ii) the liabilities and obligations incurred
since the date of the Parent Base Balance Sheet in the ordinary course of
business and consistent with past practice that would not, individually or in
the aggregate, have a Parent Material Adverse Effect.
3.7 Absence of Certain Changes. Since March 30, 1996, there has not been
--------------------------
any change in the business, properties, operations, prospectus, assets, revenues
or condition (financial or otherwise) of the Parent or any of its subsidiaries
which has resulted in a Parent Material Adverse Effect, nor has there occurred
any event or development with regard to the Parent's operations which could
reasonably be foreseen to result in a Parent Material Adverse Effect.
3.8 Finder's Fee. Except for Needham & Company, Inc. and Oliver, Lipman &
------------
Associates, neither the Parent nor the Acquisition Subsidiary has employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission the receipt of which is conditioned upon the consummation of the
Merger.
3.9 Claims and Legal Proceedings. There are no claims, actions, suits,
----------------------------
arbitrations, proceedings or investigations pending (or, to the best knowledge
of Parent, threatened) against Parent or any of its subsidiaries, and there are
no outstanding court orders, court decrees, or court stipulations to which
Parent or any of its subsidiaries is a party or by which any of their respective
assets are bound, any of which (a) question this Agreement or affect the
transactions contemplated hereby, or (b) materially restrict the present
business, properties, operations, prospects, assets or condition, financial or
otherwise, of Parent, or (c) would, individually or in the aggregate have a
Parent Material Adverse Effect or materially impair or preclude the Parent's or
the Acquisition Subsidiary's ability to consummate the Merger or the other
transactions contemplated hereby. Parent has no reason to believe that any such
claim, action, suit, arbitration, proceeding or investigation may be brought
against Parent.
3.10 Disclosure of Material Information. No representation or warranty by
----------------------------------
the Parent or the Acquisition Subsidiary contained in this Agreement, and no
statement contained in the Parent's disclosure schedule or any other document,
certificate or other instrument delivered to or to be delivered by or on behalf
of the Parent or the Acquisition Subsidiary pursuant to this Agreement contains
or will contain any untrue statement of a material fact or omits, or will omit
to state any material fact necessary, in light of the circumstances under which
it was or will be made, in order to make the statements herein or therein not
misleading.
3.11 Parent Action.
-------------
(a) The Parent has received the opinion of Needham & Company, Inc.
satisfactory to the Parent to the effect that the terms of the Merger are fair
to the Parent from a financial point of view. A copy of such letter has been
previously furnished to the Company.
(c) The Company has received a letter from Arthur Andersen & Co. LLP
satisfactory to the Parent with respect to the absence of certain attributes of
the Parent which would preclude the Merger from being treated as a "pooling of
interests" for accounting purposes. A copy of such letter has been previously
furnished to the Company.
A-30
<PAGE>
(d) On or prior to the date hereof, the Parent shall have delivered
to the Company copies of the written agreement of all executive officers,
directors and all other persons or entities who are at such time "affiliates" of
the Parent for purposes of Rule 144 under the Securities Act, to the extent such
persons or entities own shares of Parent Common Stock (the "Parent Affiliates")
substantially in the form attached hereto as Exhibit H ("Parent Affiliate
---------
Agreements"). Schedule 3.11 of the Parent disclosure schedule identifies all
-------------
persons or entities who or which are as of the date hereof Parent Affiliates.
3.12 ERISA. Schedule 3.12 of the Parent disclosure schedule contains a
-----
list of all Parent Benefit Plans (as defined below). Except as would not,
individually or in the aggregate, have a Parent Material Adverse Effect, the
Parent has no liability (nor could reasonably be expected to have any liability)
with respect to any Parent Benefit Plan for any failure to make required
contributions, to comply with applicable law or terms of such plan, for any
disallowed deduction, for any withdrawal liability or for any unfunded benefit
obligations which are not fully accrued on the Parent Financial Statements. For
purposes of this Section, the term "Parent Benefit Plan" shall mean every plan
or arrangement with respect to which the Parent or any controlled group member
of the Parent (or any other entity required to be aggregated with the Buyer
under Code Section 414(b),(c),(m) or (o)) has or could reasonably be expected to
have any liability and which is:
(i) an employee benefit plan within the meaning of Section 3 of ERISA;
or
(ii) a multiemployer plan within the meaning of Section 3(37) or
4001(a)(3) of ERISA; or
(iii) a compensation, stock purchase, stock option, stock bonus, stock
appreciation, severance, health, welfare, life, disability or other
benefit plan, fund, program, arrangement or practice which is not
covered by clause (i) or (ii) above.
ARTICLE IV
COVENANTS
4.1 Commercially Reasonable Efforts. Each of the Parties shall use
-------------------------------
commercially reasonable efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement including but not limited to the delivery of certificates
reasonably requested in connection with any opinions to be delivered hereunder.
4.2 Notices and Consents. Each of the Parties shall use commercially
--------------------
reasonable efforts to obtain, at its expense, all such waivers, permits,
consents, approvals or other authorizations from third parties and governmental
entities or authorities, and to effect all such registrations, filings and
notices with or to third parties and governmental entities or authorities,
A-31
<PAGE>
as may be necessary or desirable in connection with the transactions
contemplated by this Agreement.
4.3 Special Meeting, Prospectus/Proxy Statement and Registration
------------------------------------------------------------
Statement; Fairness Opinion.
- ---------------------------
(a) The Parent and the Company shall jointly prepare, and the Company
shall file with the SEC under the Exchange Act, proxy materials for the purpose
of soliciting proxies from Company Stockholders to vote in favor of the adoption
of this Agreement and the approval of the Merger at a special meeting of Company
Stockholders to be called and held for such purpose (the "Special Meeting").
Such proxy materials shall be in the form of a prospectus/proxy statement to be
used for the purpose of offering the Merger Shares to Company Stockholders and
soliciting such proxies from Company Stockholders (such prospectus/proxy
statement, together with any accompanying letter to stockholders, notice of
meeting and form of proxy, shall be referred to herein as the "Prospectus/Proxy
Statement"). The Company, with the assistance of the Parent, shall promptly
respond to any SEC comments on the Prospectus/Proxy Statement and shall
otherwise use commercially reasonable efforts to resolve as promptly as
practicable all SEC comments to the satisfaction of the SEC.
(b) A copy of the Rodman Opinion , shall be delivered by the Company
to the Parent no later than the day that the preliminary proxy materials
described in subparagraph (a) above are first filed with the SEC.
(c) The Parent shall file with the SEC under the Securities Act a
Registration Statement on Form S-4 (the "Registration Statement"), which shall
include the Prospectus/ Proxy Statement as a part thereof. The Parent, with the
assistance of the Company, shall promptly respond to any SEC comments on the
Registration Statement and shall otherwise use commercially reasonable efforts
to cause the Registration Statement to be declared effective as promptly as
practicable. The Parent shall also take any and all such actions as may be
necessary or as it may deem advisable for the purpose of complying with all
applicable state securities laws in connection with the offering and issuance of
the Merger Shares.
(d) Promptly following the resolution to the satisfaction of the SEC
of all SEC comments on the Prospectus/Proxy Statement and the Form S-4, the
Company shall distribute the Prospectus/Proxy Statement to its stockholders and,
pursuant thereto, shall call the Special Meeting in accordance with the DGCL and
solicit proxies from Company Stockholders to vote in favor of the adoption of
this Agreement and the approval of the Merger at the Special Meeting.
(e) The Company shall comply with all applicable provisions of and
rules under the Exchange Act and all applicable provisions of the DGCL in the
preparation, filing and distribution of the Prospectus/Proxy Statement, the
solicitation of proxies thereunder, and the calling and holding of the Special
Meeting. Without limiting the foregoing, the Company shall ensure that .the
Prospectus/Proxy Statement does not, as of the date on which it is distributed
to Company Stockholders, and as of the date of the Special Meeting, contain any
untrue statement
A-32
<PAGE>
of a material fact or omit to state a material fact necessary in order to make
the statements made, in light of the circumstances under which they were made,
not misleading (provided that the Company shall not be responsible for the
accuracy or completeness of any information furnished by the Parent in writing
for inclusion in the Prospectus/Proxy Statement).
(f) The Parent shall comply with all applicable provisions of and
rules under the Securities Act and state securities laws in the preparation and
filing of the Registration Statement and the offering and issuance of the Merger
Shares. Without limiting the foregoing, the Parent shall ensure that the
Registration Statement does not, as of its effective date, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
(provided that the Parent shall not be responsible for the accuracy or
completeness of any information relating to the Company or any other information
furnished by the Company in writing for inclusion in the Registration
Statement).
(g) The Company, acting through its Board of Directors, shall include
in the Prospectus/Proxy Statement the recommendation of its Board of Directors
that the Company Stockholders vote in favor of the adoption of this Agreement
and the approval of the Merger, and shall otherwise use commercially reasonable
efforts to obtain the Requisite Stockholder Approval. Notwithstanding the
foregoing, the obligations set forth in this paragraph (g) shall not apply (and
the Board of Directors shall be permitted to modify or withdraw any such
recommendation previously made) if the Board of Directors of the Company shall
have been advised in writing by independent legal counsel (who may be the
Company's regular legal counsel), that the fiduciary duties of the Board of
Directors under applicable law prohibit it from fulfilling the foregoing
obligations.
4.4 Operation of Business. Except as contemplated by this Agreement,
---------------------
during the period from the date of this Agreement to the Effective Time, the
Company shall (and shall cause each Subsidiary to) conduct its operations in the
ordinary course of business and consistent with past practice and in compliance
with all applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its current business
organization, keep its physical assets in good working condition, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect. Without limiting the generality of the foregoing, except
for transactions relating to the redemption, conversion, exercise, delisting or
deregistration of the Company's Redeemable Common Stock Warrants and Options and
Unit Options outstanding on the date hereof, prior to the Effective Time,
neither the Company nor any Subsidiary shall, without the written consent of the
Parent, which written consent with respect to actions set forth in clause (0),
will not be unreasonably withheld:
(a) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or authorize the issuance, sale
or delivery of, or redeem or repurchase,
A-33
<PAGE>
any stock of any class or any other securities or any rights, warrants or
options to acquire any such stock or other securities, or amend any of the terms
of any such convertible securities, Options or Warrants;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) except in the ordinary course of business and consistent with
past practice: create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases); assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person; or make any loans, advances
or capital contributions to, or investments in, any other person;
(d) enter into, adopt or amend any ERISA Benefit Plan or Benefit Plan
or any employment or severance agreement or arrangement or (except for normal
increases in the ordinary course of business and consistent with past practice)
increase in any manner the compensation or fringe benefits of, or materially
modify the employment terms of, its directors, officers or employees, generally
or individually, or pay any benefit not required by the terms in effect on the
date hereof of any existing ERISA Benefit Plan or Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any shares or other
equity interests in or securities of any Subsidiary or any corporation,
partnership, association or other business organization or division thereof or
any assets, other than purchases and sales of assets in the ordinary course of
business and consistent with past practice;
(f) amend its Charter or Bylaws;
(g) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable change
in GAAP;
(h) discharge or satisfy any security interest, lien or other
encumbrance or pay any obligation or liability other than in the ordinary course
of business and consistent with past practice;
(i) mortgage or pledge any of its property or assets or subject any
such assets to any security interest, lien or other encumbrance;
(j) sell, assign, transfer or license any Intellectual Property
Assets, other than in the ordinary course of business and consistent with past
practice;
(k) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any material
rights under, any material contract or agreement;
A-34
<PAGE>
(l) make or commit to make any capital expenditure in excess of
$25,000 per item or $100,000 in the aggregate;
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Company set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Merger
set forth in Article V not being satisfied;
(n) take any action that would jeopardize the treatment of the Merger
as a "pooling of interests" for accounting purposes; or
(o) enter into any material lease with respect to real property; or
(p) agree in writing or otherwise to take any of the foregoing
actions.
In addition, the Company shall not without prior oral consultation with the
Parent hire any employees or retain any consultants other than nonmanagement or
nonsupervisory personnel in the ordinary course of business.
4.5 Full Access. The Company shall (and shall cause each Subsidiary to)
-----------
permit representatives of the Parent to have full access (at all reasonable
times and in a manner so as not to interfere with the normal business operations
of the Company and the Subsidiaries) to all premises, properties, financial and
accounting records, contracts, other records and documents, and personnel of or
pertaining to the Company and each Subsidiary. The right of access shall include
without limitation the right to undertake environmental testing of the Company's
leased real property. Representatives of the Company shall have access to the
Parent's books and records and personnel, including senior management, (at all
reasonable times and in a manner so as not to interfere with the normal business
of the Parent) in order to conduct customary due diligence regarding the
completeness of the Parent Reports and the Registration Statement and other
information as the Company may reasonably request. Each Party (a) shall treat
and hold as confidential any Confidential Information (as defined below),
(b) shall not use any of the Confidential Information except in connection with
this Agreement, and (c) if this Agreement is terminated for any reason
whatsoever, shall return to the disclosing Party all tangible embodiments (and
all copies) thereof which are in its possession. For purposes of this Agreement,
"Confidential Information" means any information of the disclosing Party that is
furnished in writing to another Party by the disclosing Party in connection with
this Agreement: provided, however, that it shall not include any information
(i) which, at the time of disclosure, is available publicly, (ii) which, after
disclosure, becomes available publicly through no fault of the receiving Party,
(iii) which the receiving Party knew or to which the receiving Party had access
prior to disclosure, or (iv) which is required by law to be disclosed.
4.6 Notice of Breaches. The Company shall promptly deliver to the Parent
------------------
written notice of any event or development that would (a) render any statement,
representation or warranty of the Company in this Agreement (including the
Company Disclosure Schedule) inaccurate or incomplete in any material respect,
or (b) constitute or result in a breach by the
A-35
<PAGE>
Company of, or a failure by the Company to comply with, any agreement or
covenant in this Agreement applicable to such Party. The Parent or the
Acquisition Subsidiary shall promptly deliver to the Company written notice of
any event or development that would (i) render any statement, representation or
warranty of the Parent or the Acquisition Subsidiary in this Agreement
inaccurate or incomplete in any material respect, or (ii) constitute or result
in a breach by the Parent or the Acquisition Subsidiary of, or a failure by the
Parent or the Acquisition Subsidiary to comply with, any agreement or covenant
in this Agreement applicable to such Party. No such disclosure shall be deemed
to avoid or cure any such misrepresentation or breach.
4.7 Exclusivity.
-----------
(a) The Company shall not, and the Company shall use commercially
reasonable efforts to cause each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (a) encourage,
solicit, initiate, engage or participate in discussions or negotiations with any
person or entity (other than the Parent) concerning any merger, consolidation,
sale of material assets, tender offer, recapitalization, accumulation of Company
Shares, proxy solicitation or other business combination involving the Company,
any Subsidiary or any division of the Company or any Subsidiary (an "Acquisition
Transaction") or (b) provide any information concerning the business, properties
or assets of the Company or any Subsidiary to any person or entity (other than
the Parent).
(b) Anything herein to the contrary notwithstanding, in the event the
Company receives an unsolicited written proposal for, or an unsolicited written
indication of a serious interest in entering into, an Acquisition Transaction
from a bona fide, financially capable third party that contains no financing
contingency, (i) the Company in its discretion may furnish to and communicate
with such third party public information requested by such party, and (ii) the
Company may enter into discussions and negotiations with such third party and
may, at the request of such third party, furnish such third party with non-
public information concerning the Company, provided (in the case of this clause
(ii)) that (A) the Company gives the Buyer written notice thereof at least five
(5) business days prior to furnishing any such information, (B) the Company's
Board of Directors, after consultation with and based upon the advice of an
independent financial advisor (who may be the Company's regularly engaged
financial advisor), determines in good faith that such third party is
financially capable, without any financing contingency, of consummating an
Acquisition Transaction that would yield a higher value to the Company
Stockholders than will the Merger, (C) the Company's Board of Directors, after
weighing such advice, determines that taking such action is more likely than not
to lead to an Acquisition Transaction with such third party that would yield a
higher value to the Company Stockholders than will the Merger, and (D) the
Company's Board of Directors shall have been advised in writing by independent
legal counsel (who may be the Company's regular legal counsel), that any failure
to provide such non-public information to such party would likely constitute a
breach of the fiduciary responsibilities of the Board of Directors to the
Company Stockholders.
A-36
<PAGE>
4.8 Agreements from Certain Company Affiliates. The Company shall advise
------------------------------------------
the Parent in writing of any person or entity who or which, to the Company's
knowledge, becomes a Company Affiliate after the date hereof and prior to the
Effective Time and, if requested by Parent, shall use all commercially
reasonable efforts to have each such person or entity deliver to the Parent, no
later than the date such person or entity becomes a Company Affiliate, an
Affiliate Agreement.
4.9 Listing of Merger Shares. On or before the Effective Time, the
------------------------
Parent shall list the Merger Shares on the Nasdaq National Market.
4.10 Indemnification.
---------------
(a) For a period of five years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company (or
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred before the Effective Time; provided, however,
that the Surviving Corporation shall not be obligated to make annual premium
payments for such insurance to the extent that such premiums exceed an amount
equal to 150% of the annual premiums paid as of the date hereof by the Company
for such insurance and if such premiums exceed such amount the Surviving
Corporation shall purchase insurance policies in amounts and with coverage as
reasonably can be purchased for such amount.
(b) Parent agrees to be jointly and severally liable with the Company and
the Surviving Corporation for their indemnification obligations to the Company's
directors, in all capacities in which such directors served the Company or its
Subsidiaries while directors prior to the Effective Time, as set forth in the
Company's Charter and to the extent such indemnification by the Company is
permitted under DGCL; provided, however that such obligation of Parent shall be
limited to the working capital of the Company as of the Effective Time
(determined in accordance with GAAP consistently applied) less any amounts
indemnified by the Company (excluding amounts paid by insurance of the Company).
(c) Parent further agrees to be jointly and severally liable with the
Surviving Corporation for any indemnification obligation it may have to
directors (in any capacity) of the Company who continue to serve as directors of
the Surviving Corporation after the Effective Time pursuant to any
indemnification agreements entered into by the Company with such directors, with
respect to acts or events (in any capacity) while serving as a director of the
Surviving Corporation on or after the Effective Time to the extent such
indemnification by the Surviving Corporation is permitted under DGCL.
4.11 Officers and Employees. The Company shall use commercially reasonable
----------------------
efforts to encourage the officers of the Company to remain in the employ of the
Parent following the Merger.
A-37
<PAGE>
4.12 Form 8-K. The Parent shall use all reasonable efforts to file a
--------
Current Report on Form 8-K containing the financial results of the combined
operations of the Company and the Parent for the first full calendar month
following the Effective Time within thirty (30) days of the close of such month,
and in no event shall file such Report later than forty-five (45) days after the
close of such month, unless otherwise consented to by Larry S. Grossman and
Arlen L. Issette.
4.13 Tax-Free Merger. The Parent, the Acquisition Subsidiary and the
---------------
Company shall each use all reasonable efforts to cause the Merger to be treated
as a reorganization within the meaning of Section 368 of the Code and shall not
knowingly take or fail to take any action which action or failure to act would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368 of the Code.
4.14 Proprietary Information Agreements. The Company shall use all
------------------------------------
reasonable efforts to cause all of its salaried employees and technical
consultants to enter into, prior to the Closing, proprietary information and
invention agreements in form reasonably satisfactory to the Parent.
4.15 Hart-Scott-Rodino. To each party's knowledge, based upon the
-----------------
published financial statements of each party, no filing pursuant to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), is
required to be made with respect to the Merger and the other transactions
contemplated hereby. In the event that such filing may be required at a later
date as a result of either or both parties' publication of further financial
information, such additional governmental approval requirement and the approvals
required for the consummation of the transactions contemplated hereby shall not
constitute a breach of any representations and warranties under this Agreement,
and each party shall use all commercially reasonable efforts to file as promptly
as practicable such Notification and Report Forms under the HSR Act with the
Federal Trade Commission and the Antitrust Division of the Department of
Justice, and use all commercially reasonable efforts to respond as promptly as
practicable to all inquiries received from such governmental agencies for
additional information or documentation in order to obtain as soon as
practicable all necessary governmental approvals, if any, for the transactions
contemplated hereby under the HSR Act.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations
--------------------------------------
of each Party to consummate the Merger are subject to the satisfaction or waiver
by each of the Parties of the following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
A-38
<PAGE>
(b) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect; and
(c) the Merger Shares shall have been authorized for listing on the
Nasdaq National Market.
5.2 Conditions to Obligations of the Parent and the Acquisition
-----------------------------------------------------------
Subsidiary. The obligation of each of the Parent and Acquisition Subsidiary to
consummate the Merger is subject to the satisfaction or waiver by the Parent and
the Acquisition Subsidiary of the following additional conditions:
(a) the Company and the Subsidiaries shall have obtained all of the
waivers, permits, consents, approvals or other authorizations, and effected all
of the registrations, filings and notices, referred to in Section 4.2 that are
reasonably deemed necessary by the Parent, upon advice of counsel, to provide
for the continuation of all material agreements and to consummate the Merger;
(b) the representations and warranties of the Company set forth in
Article II shall be true and correct in all material respects when made on the
date hereof and shall be true and correct in all material respects as of the
Effective Time as if made as of the Effective Time, except for representations
and warranties made as of a specific date, which shall be true and correct in
all material respect as of such date;
(c) the Company and each Subsidiary shall have performed or complied
in all material respects with its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the Effective
Time;
(d) the Company shall have delivered to the Parent and the
Acquisition Subsidiary a certificate of its Chairman, President and Chief
Financial Officer to the effect that each of the conditions specified in clauses
(a) of Section 5.1 and clauses (a) through (c) of this Section 5.2 is satisfied
in all respects;
(e) the Parent and the Acquisition Subsidiary shall have received
from Katten, Muchin & Zavis, counsel to the Company, an opinion with respect to
the matters set forth in Exhibit I attached hereto, addressed to the Parent and
---------
the Acquisition Subsidiary and dated as of the Closing Date;
(f) no action, suit or proceeding shall be pending or threatened
before any governmental entity or authority wherein an unfavorable judgment,
order, decree, stipulation or injunction would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Parent to own, operate
or control
A-39
<PAGE>
any of the assets and operations of the Surviving Corporation and the
Subsidiaries following the Merger, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(g) the Parent shall have received a letter from BDO Seidman, LLP
reasonably satisfactory to the Parent with respect to the absence of certain
attributes of the Company which would preclude the Merger from being treated as
a "pooling of interests" for accounting purposes;
(h) the Parent shall have received a letter from Arthur Andersen LLP,
auditors for the Parent, in a form reasonably satisfactory to the Parent, to the
effect that the Parent may treat the Merger as a "pooling of interests" for
accounting purposes;
(i) the Parent shall have received Affiliate Agreements executed by
all Company Affiliates;
(j) the Parent shall have received an opinion from Brown, Rudnick,
Freed & Gesmer (or, in the absence of such an opinion from said firm, from
Katten Muchin & Zavis, in either case in a form reasonably satisfactory to the
Parent), dated the Closing Date, based upon certain factual representations of
the Company and the Parent, to the effect that the Merger will constitute a
reorganization for federal income tax purposes within the meaning of Section
368(a) of the Code and no gain or loss will be recognized by the Company, the
Parent or the Acquisition Subsidiary as a result of the Merger;
(k) from the date of this Agreement to the Effective Time, there
shall not have been any event or development which results in a Company Material
Adverse Effect, nor shall there nave occurred any event or development which
could reasonably be likely to result in a Company Material Adverse Effect in the
future;
(l) the Parent shall have received from Cooper & Dunham, LLP, patent
counsel to the Parent, an opinion with respect to the matters set forth in
Exhibit J attached hereto, addressed to the Parent and dated as of the Closing
- ---------
Date; and
(m) all actions to be taken by the Company in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Parent and the Acquisition Subsidiary.
5.3 Conditions to Obligations of the Company. The obligation of the
----------------------------------------
Company to consummate the Merger is subject to the satisfaction or waiver by the
Company of the following additional conditions:
(a) the representations and warranties of the Parent and the
Acquisition Subsidiary set forth in Article III (other than Section 3.9(a) or
(c)) shall be true and correct in all material respects when made on the date
hereof and shall be true and correct in all material respects as of the
Effective Time as if made as of the Effective Time, except for representations
A-40
<PAGE>
and warranties made as of a specific date, which shall be true and correct in
all material respects as of such date;
(b) each of the Parent and the Acquisition Subsidiary shall have
performed or complied with in all material respects its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Effective Time:
(c) each of the Parent and the Acquisition Subsidiary shall have
delivered to the Company a certificate of its Chairman and Chief Financial
Officer to the effect that each of the conditions specified in clauses (b) and
(c) of Section 5.1 and clauses (a), (b) and (d) of this Section 5.3 is satisfied
in all respects;
(d) the Parent and the Acquisition Subsidiary shall have obtained all
of the waivers, permits, consents, approvals or other authorizations referred to
in Section 4.2 that are reasonably deemed necessary by the Company, upon advice
of counsel, to consummate the Merger;
(e) no writ, order, decree or injunction of a court of competent
jurisdiction or governmental entity shall have been entered against the Parent,
the Acquisition Subsidiary or the Company which prohibits the consummation of
the Merger;
(f) no action, suit or proceeding shall be pending or threatened
before any governmental entity or authority wherein an unfavorable judgment,
order, decree, stipulation or injunction would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) materially and adversely affect or otherwise encumber the
title of the Merger Shares to be issued to the stockholders of the Company upon
consummation of the Merger; provided, however, that the Company shall
automatically be deemed to have waived this requirement if the Parent agrees to
provide the Company, its officers, directors, controlling persons and
stockholders, with indemnification with respect to such action, suit or
proceeding in form and substance reasonably satisfactory to the Company;
(g) the Company shall have received from Brown, Rudnick, Freed &
Gesmer, counsel to the Parent, and the Acquisition Subsidiary an opinion with
respect to the matters set forth in Exhibit K attached hereto, addressed to the
---------
Company and dated as of the Closing Date;
(h) the Company shall have received a written opinion from Katten
Muchin & Zavis (or in the absence of such an opinion from said firm, from Brown
Rudnick, Freed & Gesmer, in either case in a form reasonably acceptable to the
Company), dated the Closing Date, based upon certain factual representations of
the Company and the Parent, to the effect that the Merger will constitute a
reorganization for federal income tax purposes within the meaning of Section
368(a) of the Code and that no gain or loss will or may be recognized by the
Company Stockholders as a result of the Merger;
(i) from the date of this Agreement to the Effective Time, there shall
not have been any event or development which results in a Parent Material
Adverse Effect, nor shall there
A-41
<PAGE>
have occurred any event or development which could reasonably be likely to
result in a Parent Material Adverse Effect in the future;
(j) Larry S. Grossman and Arlen L. Issette shall have been appointed
Corporate Vice Presidents of Parent effective as of the Effective Time; and
(k) all actions to be taken by the Parent and the Acquisition
Subsidiary in connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby shall be reasonably satisfactory
in form and substance to the Company.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1 Termination. In connection with the structure of the transactions as
-----------
described in this Agreement, the parties have agreed that this Agreement shall
not be terminated, nor the Merger abandoned, except in accordance with the
provisions of this Article VI, all strictly construed against the Party seeking
such termination. This Agreement may be terminated and the Merger may be
abandoned any time prior to the Effective Time, whether before or after approval
by the Company Stockholders:
(i) by mutual consent of the Boards of Directors of the Parent and
the Company;
(ii) by either the Parent or the Company, if, without fault of such
terminating party, the Merger shall not have been consummated on or before
November 30, 1996;
(iii) by either the Parent or the Company, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger, and such order, decree ruling or other action shall have
become final and nonappealable; or
(iv) by either the Parent or the Company, if this Agreement and the
Merger fail to receive the Requisite Stockholder Approval.
6.2 Termination by the Parent. This Agreement may be terminated and the
-------------------------
Merger may be abandoned by action of the Board of Directors of the Parent, at
any time prior to the Effective Time, before or after the approval by the
Company Stockholders, if:
(i) the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in Articles I and IV of this
Agreement to be complied with or performed by the Company at or prior to such
date of termination; provided, however, that if such failure or failures are
capable of being cured prior to the Effective Time, such failure,
A-42
<PAGE>
or failures shall not have been cured within fifteen (15) days of delivery to
the Company of written notice of such failure or failures.
(ii) there exists a breach or breaches of any representation or
warranty of the Company contained in this Agreement in any material respect such
that the Closing condition set forth in Section 5.2(b) would not be satisfied;
provided, however, that if such failure, breach or breaches are capable of being
cured prior to the Effective Time, such failure, breach or breaches shall not
have been cured within fifteen (15) days of delivery to the Company of written
notice of such failure, breach or breaches; or
(iii) the Company shall furnish or disclose non-public information to
a third party with respect to any Acquisition Transaction, or shall have
resolved to do the foregoing and publicly disclose such resolution.
6.3 Termination by the Company. This Agreement may be terminated and the
--------------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the Company Stockholders, by action of the Board of Directors of
the Company, if:
(i) the Parent or the Acquisition Subsidiary shall have failed to
comply in any material respect with any of the covenants or agreements contained
in Articles I and IV of this Agreement to be complied with or performed by the
Parent or the Acquisition Subsidiary at or prior to such date or termination;
provided, however, that if such failure or failures are capable of being cured
prior to the Effective Time, such failure, or failures shall not have been cured
within fifteen (15) days of delivery to the Parent of written notice of such
failure or failures
(ii) there exists a breach or breaches of any representation or
warranty of the Parent or the Acquisition Subsidiary contained in this Agreement
in any material respect such that the Closing condition set forth in Section
5.3(a) would not be satisfied; provided, however, that if such failure, breach
or breaches are capable of being cured prior to the Effective Time, such
failure, breach or breaches shall not be cured within fifteen (15) days of
delivery to the Parent of written notice of such failure, breach or breaches; or
(iii) if the Average Market Value of the Parent Common Stock is less
than $30.17 and Parent does not elect to make a Parent Adjustment Election by so
delivering such election in writing to the Company within fifteen (15) days
after the date of the Stockholders Meeting.
6.4 Procedure for Termination. In the event of termination and
-------------------------
abandonment of the Merger by the Parent or the Company pursuant to this Article
VII, written notice thereof shall forthwith be given to the other.
A-43
<PAGE>
6.5 Effect of Termination and Abandonment.
-------------------------------------
(a) In the event of termination of this Agreement and abandonment of
the Merger pursuant to this Article VI, no Party hereto (or any of its directors
or officers) shall have any liability or further obligation to any other Party
to this Agreement, except as provided in Section 4.5 (regarding confidentiality)
and this Section 6.5 and except that nothing herein shall relieve any Party from
liability for any breach of this Agreement.
(b) In the event of: (i) a termination of this Agreement pursuant to
Section 6.1(iv), or (ii) any termination of this Agreement by the Parent
pursuant to Section 6.2, then the Company shall promptly pay the Parent by wire
transfer of immediately available funds to an account specified by the Parent up
to $1.5 million for all documented fees and expenses incurred by the Parent
(including the reasonable fees and expenses of counsel, accountants, consultants
and advisors) in connection with this Agreement and the transactions
contemplated hereby (subject to such $1.5 million limit, "Parent Documented
Expenses"). In the event of a termination of this Agreement pursuant to Section
6.1(iv), where the Board of Directors of the Company withdraws its
recommendation of the Merger or modifies such recommendation in a manner adverse
to the Parent, or Section 6.2(iii), the Company shall promptly pay the Parent
by wire transfer of immediately available funds to an account specified by the
Parent an additional fee of $2.4 million (the "Break-up Fee"). To the extent
that either the Parent Documented Expenses or the Break-up Fee have not already
become payable and been paid, and, if prior to any termination pursuant to
Section 6.1(i), (ii), (iii) or (iv) or Section 6.2(i), (ii) or (iii), any person
shall have made a bona fide proposal concerning a Business Combination
Transaction and prior to or within twelve (12) months after the termination of
this Agreement the Company or any of its Subsidiaries, or any Company Affiliate
enters into a definitive agreement with a third party with respect to a Business
Combination Transaction or a Business Combination Transaction is effected, then
the Company, prior to entering into any such definitive agreement or any such
Business Combination Transaction being effected, shall promptly pay the Parent
by wire transfer of immediately available funds to an account specified by the
Parent the Parent Documented Expenses and the Break-up Fee. As used in this
Section 6.5, the term "Business Combination Transaction" shall mean any of the
following involving the Company or any Subsidiary, that is material to the
business, results of operation, prospects or financial condition of the Company
and its Subsidiaries taken as whole: (1) any merger, consolidation, share
exchange, business combination or other similar transaction (other than the
Merger); (2) any sale, lease, exchange, transfer or other disposition of 50% or
more of the assets of the Company and its Subsidiaries, taken as a whole, in a
single transaction or series of transactions; or (3) the acquisition by a person
or entity, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of beneficial ownership
of 33 1/3% or more of the Company Shares, whether by tender offer, exchange
offer or otherwise.
(c) In the event of a termination of this Agreement by the Company,
pursuant to Section 6.3, (i) or (ii) then the Parent shall promptly pay the
Company by wire transfer of immediately available funds to an account specified
by the Company up to $1.5 million for all documented fees and expenses incurred
by the Company (including the reasonable
A-44
<PAGE>
fees and expenses of counsel, accountants, consultants and advisors) in
connection with this Agreement and the transactions contemplated hereby.
ARTICLE VII
MISCELLANEOUS
7.1 Fees and Expenses. Except as set forth in Section 6.5, the Parent
-----------------
and the Company shall bear their respective expenses, in each case, in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement; provided, however, that if the Merger is
consummated, the Company and the Subsidiaries shall not incur more than $1.5
million in legal, accounting and investment banking fees and expenses in
connection with the Merger, without the consent of the Parent, which shall not
be unreasonably withheld.
7.2 Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
facsimile transmission, receipt telephonically confirmed) addressed as provided
below and if either (a) actually delivered electronically or physically at said
address, or (b) in the case of a letter, three (3) business days shall have
elapsed after the same shall have been deposited in the United States mail,
postage prepaid and registered or certified, return receipt requested or (c)
forty eight (48) hours shall have elapsed after the same shall have been sent by
nationally recognized overnight courier:
If to the Company to:
FluoroScan Imaging Systems, Inc.
650-B Anthony Trail
Northbrook, IL 60062
Attn: Chief Executive Officer
Tel: 847-564-5400
Fax 847-564-5647
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attn: Jeffrey R. Patt, Esq.
Tel: 312-902-5200
Fax: 312-902-1061
A-45
<PAGE>
If to the Parent or the Acquisition Subsidiary, to:
Hologic, Inc.
590 Lincoln Street
Waltham, MA 02154
Attn: President
Tel: 617)890-2300
Fax: 617)890-8031
with a copy to:
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Attn: Lawrence M. Levy, Esquire
Tel: (617) 856-8200
Fax: (617) 856-8201
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
7.3 Publicity and Disclosure. No Party shall issue or approve any press
------------------------
releases or any public disclosure or announcement, either written or oral, of
the transactions contemplated by this Agreement without the prior knowledge and
written consent of the other parties; provided, however, that any Party may make
any public disclosure it believes in good faith is required by law or regulation
(in which case the disclosing Party shall advise the other Parties and provide
them with a copy of the proposed disclosure prior to making the disclosure).
7.4 Entire Agreement. This Agreement (including all exhibits or
----------------
schedules appended to this Agreement and all documents delivered pursuant to or
referred to in this Agreement, all of which are hereby incorporated herein by
reference) constitutes the entire agreement between the parties, and all
promises, representations, understandings, warranties and agreements with
reference to the subject matter hereof and inducements to the making of this
Agreement relied upon by any party hereto, have been expressed herein or in the
documents incorporated herein by reference.
7.5 Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision hereof.
7.6 Assignability. This Agreement may not be assigned otherwise than by
-------------
operation of law (a) by the Parent or the Acquisition Subsidiary without the
prior written consent of the Company or (b) by the Company without the prior
written consent of the Parent. However, any or all rights of the Parent to
receive performance (but not the obligations of the Parent to Company hereunder)
and rights to assert claims against the Company or the Company Stockholders or
in respect of breaches of representations, warranties or covenants of the
A-46
<PAGE>
Company hereunder, may be assigned by the Parent to (i) any direct or indirect
subsidiary, parent or other affiliate of the Parent, or (ii) any purchaser of
all or substantially all of the assets or business of the Parent after Closing
subject to such assignee's assumption of all of the Parent's obligations
hereunder. This Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns.
7.7 Amendments and Waivers. The Parties may mutually amend any provision
----------------------
of this Agreement at any time prior to the Effective Time with the prior
authorization of their respective Boards of Directors; provided, however, that
any amendment effected subsequent to the Requisite Stockholder Approval shall be
subject to the restrictions contained in the DGCL. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
7.8 Governing Law; Venue.
--------------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware (other than the choice of law principles
thereof), except that any representations and warranties with respect to real
and tangible property shall be governed by and construed in accordance with the
laws of the jurisdiction where such property is situated if other than in the
State of Delaware.
(b) Any claim, action, suit or other proceeding initiated by any
Party, under or in connection with this Agreement may be asserted, brought,
prosecuted and maintained in any Federal or state court in the State of
Delaware, as the Party bringing such action, suit or proceeding shall elect,
having jurisdiction over the subject matter thereof, and the Parties hereby
waive any and all rights to object to the laying of venue in any such court and
to any right to claim that any such court may be an inconvenient forum. Each of
the Parties hereby submit themselves to the jurisdiction of each such court and
agree that service of process on them in any such action, suit or proceeding may
be effected by the means by which notices are to be given to it under this
Agreement.
7.9 Remedies. The Parties hereto acknowledge that the remedy at law for
--------
any breach of the obligations undertaken by the Parties hereto is and will be
insufficient and inadequate and that the Parties hereto shall be entitled to
equitable relief, in addition to remedies at law. In the event of any action to
enforce the provisions of this Agreement, each of the Parties shall waive the
defense that there is an adequate remedy at law. Without limiting any remedies
the Parties may otherwise have hereunder or under applicable law, in the event
any Party refuses to perform its obligations under this Agreement, the other
Parties shall have, in addition to any other rights at law or equity, the right
to specific performance.
A-47
<PAGE>
7.10 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.11 Effect of Table of Contents and Headings. Any table of contents,
----------------------------------------
title of an article or section heading herein contained is for convenience of
reference only and shall not affect the meaning of construction of any of the
provisions hereof.
7.12 No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares are intended for the benefit
of the Company Stockholders, (b) the provisions in Sections 4.10 concerning
insurance and indemnification are intended for the benefit of the individuals
specified therein and their respective legal representatives, and (c) the
provisions in Section 4.12 are intended for the benefit of the Company
Affiliates.
7.13 Survival of Representations. The respective representations and
---------------------------
warranties of Parent, the Acquisition Subsidiary and the Company contained
herein or in any certificates or other documents delivered prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto and shall not survive the Closing. Representations and
warranties to a party's knowledge shall mean such party shall have made due
inquiry and investigation. Nothing herein shall relieve any party for liability
for fraud in connection with any representation or warranty made hereunder.
ARTICLE VIII
DEFINITIONS
The following capitalized terms used herein shall have the meanings ascribed
in the indicated sections.
<TABLE>
<S> <C>
Acquisition Subsidiary...................................... First Paragraph
Acquisition Transaction..................................... 4.7(a)
Affiliate Agreement......................................... 4.8
Average Market Value........................................ 1.5(a)
Base Balance Sheet.......................................... 2.7(b)
Benefit Plan................................................ 2.17(a)
Break-up Fee................................................ 6.5(b)
Business Combination Transaction............................ 6.5(b)
Certificate of Merger....................................... 1.1
Certificates................................................ 1.7(a)
Charter..................................................... 2.1
Closing..................................................... 1.2
Closing Date................................................ 1.2
Code........................................................ 1.9(a)
</TABLE>
A-48
<PAGE>
<TABLE>
<S> <C>
Company..................................................... First Paragraph
Company Affiliates.......................................... 2.33(d)
Company Disclosure Schedule................................. First Paragraph
of Article II
Company Material Adverse Effect............................. 2.1
Company Reports............................................. 2.7(a)
Company Shares.............................................. 1.5(a)
Company Stockholders........................................ 1.5(a)
Confidential Information.................................... 4.5
Conversion Ratio............................................ 1.5(a)
DGCL........................................................ 1.1
Effective Time.............................................. 1.1
ERISA....................................................... 2.17(a)(i)
ERISA Affiliate............................................. 2.17(a)
ERISA Benefit Plan.......................................... 2.17(a)
Exchange Act................................................ 2.6
Exchange Agent.............................................. 1.3
Financial Statements........................................ 2.7(a)
GAAP........................................................ 2.7(a)
HSR Act..................................................... 4.15
Intellectual Property Rights................................ 2.14(a)
Material Licenses........................................... 2.14(d)
Merger...................................................... 1.1
Merger Consideration........................................ 1.5(b)
Merger Shares............................................... 1.5(a)
Meyerson.................................................... 2.33(e)
Moratorium.................................................. 2.32
Options..................................................... 1.9(a)
Parent...................................................... First Paragraph
Parent Adjustment Election.................................. 1.5(a)
Parent Affiliate............................................ 3.11
Parent Affiliates Agreement................................. 3.11(d)
Parent Base Balance Sheet................................... 3.5(b)
Parent Benefit Plan......................................... 3.12
Parent Common Stock......................................... 1.5(a)
Parent Documented Expenses.................................. 6.2(b)
Parent Financial Statements................................. 3.5(a)
Parent Material Adverse Effect.............................. 3.4
Parent Purchase Right....................................... 1.5(a)
Parent Reports.............................................. 3.5(a)
Parties..................................................... First Paragraph
PBGC........................................................ 2.17(d)(iii)
Prospectus/Proxy Statement.................................. 4.3(a)
Registration Statement...................................... 4.3(c)
Requisite Stockholder Approval.............................. 2.4
</TABLE>
A-49
<PAGE>
<TABLE>
<S> <C>
Rodman Opinion.............................................. 2.33(b)
SEC......................................................... 2.7(a)
Securities Act.............................................. 1.9(c)
Site........................................................ 2.18(a)
Special Meeting............................................. 4.3(a)
Stockholder Letter Agreements............................... 2.34(b)
Subsidiary.................................................. 2.3
Surviving Corporation....................................... 1.1
Tax Returns................................................. 2.10
Taxes....................................................... 2.10
Unit Option................................................. 1.9(a)
Unit........................................................ 1.9(a)
Warrants.................................................... 1.9(a)
</TABLE>
A-50
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as an instrument under seal in multiple counterparts as of the date set
forth above by their duly authorized representatives.
HOLOGIC, INC.
BY:/s/ S. David Ellenbogen
_______________________________
Name: S. David Ellenbogen
Title: Chairman of the Board and
Chief Executive Officer
FENWAY ACQUISITION CORP.
BY:/s/ S. David Ellenbogen
_______________________________
Name: S. David Ellenbogen
Title: President
FLUOROSCAN IMAGING SYSTEMS, INC
BY:/s/ Larry S. Grossman
_______________________________
Name: Larry S. Grossman
Title: Chairman of the Board and
Chief Executive Officer
A-51
<PAGE>
AGREEMENT AND PLAN OF MERGER
List of Schedules and Exhibits
<TABLE>
<S> <C>
Schedule 2.1 Organization and Qualification of the Company
Schedule 2.2(b) Capitalization
Schedule 2.2(c) Capitalization
Schedule 2.3 Subsidiaries
Schedule 2.7(a) Reports and Financial Statements
Schedule 2.7(c) Books of Account
Schedule 2.9 Absence of Certain Changes
Schedule 2.10 Payment of Taxes
Schedule 2.11(b) Title to Properties; Liens; Condition of Properties
Schedule 2.11(c) Title to Properties; Liens; Condition of Properties
Schedule 2.11(d) Title to Properties; Liens; Condition of Properties
Schedule 2.13 Redeemable Common Stock Warrants
Schedule 2.14(a) Intellectual Property Rights
Schedule 2.14(b) Intellectual Property Rights
Schedule 2.14(c) Intellectual Property Rights
Schedule 2.14(d) Intellectual Property Rights
Schedule 2.14(e) Intellectual Property Rights
Schedule 2.14(f) Intellectual Property Rights
Schedule 2.15 Contracts and Commitments
Schedule 2.15(a) Contracts and Commitments
Schedule 2.15(b) Contracts and Commitments
Schedule 2.15(c) Contracts and Commitments
Schedule 2.16 Labor and Employee Relations
Schedule 2.16(a) Labor and Employee Relations
Schedule 2.16(b) Labor and Employee Relations
Schedule 2.16(d) Labor and Employee Relations
Schedule 2.16(f) Labor and Employee Relations
Schedule 2.16(g) Labor and Employee Relations
Schedule 2.16(h) Labor and Employee Relations
Schedule 2.17(a) Employee Benefits and ERISA
Schedule 2.17(b) Employee Benefits and ERISA
Schedule 2.17(d) Employee Benefits and ERISA
Schedule 2.17(e) Employee Benefits and ERISA
Schedule 2.18(a) Environmental Matters
Schedule 2.18(b) Environmental Matters
Schedule 2.18(c) Environmental Matters
Schedule 2.18(d) Environmental Matters
Schedule 2.18(e) Environmental Matters
Schedule 2.18(f) Environmental Matters
</TABLE>
A-52
<PAGE>
<TABLE>
<S> <C>
Schedule 2.18(g) Environmental Matters
Schedule 2.18(h) Environmental Matters
Schedule 2.19 Permits
Schedule 2.20 Warranty or Other Claims
Schedule 2.21 Claims and Legal Proceedings
Schedule 2.22 Borrowings and Guarantees
Schedule 2.24 Insurance
Schedule 2.25 Government Contracts
Schedule 2.27 Fee of Rodman & Renshaw, Inc.
Schedule 2.33 Stockholder Affiliates of the Company
Schedule 3.2 Capitalization
Schedule 3.11 Parent Affiliates
Schedule 3.12 ERISA
Exhibit A Certificate of Merger
Exhibit B Affiliate Agreement
Exhibit C Option Agreement
Exhibit D Stockholder Letter Agreement of Larry S. Grossman
Exhibit E Stockholder Letter Agreement of Arlen L. Issette
Exhibit F Employment Agreement of Larry S. Grossman
Exhibit G Employment Agreement of Arlen L. Issette
Exhibit H Parent Affiliate Agreement
Exhibit I Opinion of Katten, Muchin & Zavis, counsel
Exhibit J Opinion of Cooper & Dunham, LLP
Exhibit K Opinion of Brown, Rudnick, Freed & Gesmer
</TABLE>
A-53
<PAGE>
Exhibit A
---------
CERTIFICATE OF MERGER
OF
FENWAY ACQUISITION CORP., a Delaware Corporation
WITH AND INTO
FLUOROSCAN IMAGING SYSTEMS, INC., a Delaware Corporation
********************
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware, the undersigned corporations organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DO HEREBY
CERTIFY:
FIRST: That the name and state of incorporation of each of the
-----
constituent corporations are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
1. Fenway Acquisition Corp. Delaware
2. FluoroScan Imaging Systems, Inc. Delaware
SECOND: That an Agreement and Plan of Merger dated July __, 1996 has
------
been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Section 251 of
the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation of the merger is
-----
FluoroScan Imaging Systems, Inc. (the "Surviving Corporation").
FOURTH: The Certificate of Incorporation of the Surviving Corporation
------
shall be Amended and Restated in its entirety to read as set forth in Exhibit A
---------
attached hereto.
FIFTH: That the executed copy of the Agreement and Plan of Merger is
-----
on file at the principal place of business of the Surviving Corporation. The
address of the principal place of business of the Surviving Corporation is 650-B
Anthony Trail, Northbrook, Illinois 60062.
A-54
<PAGE>
SIXTH: That a copy of the Agreement and Plan of Merger will be
-----
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of either constituent corporation.
IN WITNESS WHEREOF, the undersigned, being the President of Fenway
Acquisition Corp., does hereby execute this Certificate of Merger and so
certify, affirm and acknowledge under penalties of perjury that this is his free
act and deed and that the facts stated herein are true, this __ day of
__________, 1996.
FENWAY ACQUISITION CORP.
By:______________________________
S. David Ellenbogen, President
IN WITNESS WHEREOF, the undersigned, being the President of FluoroScan
Imaging Systems, Inc., does hereby execute this Certificate of Merger and so
certify, affirm and acknowledge under penalties of perjury that this is his free
act and deed and that the facts stated herein are true, this __ day of
__________, 1996.
FLUOROSCAN IMAGING SYSTEMS, INC.
By:___________________________
Arlen L. Issette, President
A-55
<PAGE>
Exhibit A
---------
AMENDED AND RESTATED
--------------------
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
FLUOROSCAN IMAGING SYSTEMS, INC.
--------------------------------
FIRST: The name of the corporation (hereinafter called the
-----
"Corporation") is FluoroScan Imaging Systems, Inc.
SECOND: The address, including street, number, city, and county, of the
------
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, Wilmington, Delaware, New Castle County; and the name of the registered
agent of the Corporation in the State of Delaware at such address is Corporation
Service Company.
THIRD: The nature of the business and the purposes to be conducted and
-----
promoted by the Corporation, shall be any lawful business, to promote any lawful
purpose, and to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
------
have authority to issue is as follows:
2,000 shares of Common Stock, $.01 par value.
FIFTH: The Corporation shall have perpetual existence.
-----
SIXTH: Whenever a compromise or arrangement is proposed between this
-----
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 29l of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the
A-56
<PAGE>
said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of the
-------
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
1. The business of the Corporation shall be conducted by the officers
of the Corporation under the supervision of the Board of Directors.
2. The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws. No
election of Directors need be by written ballot.
3. The Board of Directors of the Corporation may adopt, amend or repeal
the By-Laws of the Corporation at any time after the original adoption of the
By-Laws according to Section 109 of the General Corporation Law of the State of
Delaware; provided, however, that any amendment to provide for the
classification of directors of the Corporation for staggered terms pursuant to
the provisions of subsection (d) of Section 141 of the General Corporation Law
of the State of Delaware shall be set forth in an amendment to this Certificate
of Incorporation, in an initial By-Law, or in a By-Law adopted by the
stockholders of the Corporation entitled to vote.
EIGHTH: (a) The Corporation may, to the fullest extent permitted by
------
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which a person indemnified may be entitled
under any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(b) No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this paragraph (b) of
this Article Eighth shall apply to or have any
A-57
<PAGE>
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such Director occurring prior to
such amendment.
NINTH: From time to time any of the provisions of this Certificate of
-----
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article Ninth.
A-58
<PAGE>
Exhibit B
---------
AFFILIATE'S AGREEMENT
July 18, 1996
Hologic, Inc.
590 Lincoln Street
Waltham, Massachusetts 02154
Dear Sirs:
An Agreement and Plan of Merger dated as of the date hereof (the
"Agreement") has been entered into by and between Hologic, Inc. (the "Parent"),
Fenway Acquisition Corp. (the "Acquisition Subsidiary") and FluoroScan Imaging
Systems, Inc. (the "Company"). The Agreement provides for the merger of the
Acquisition Subsidiary with and into the Company (the "Merger"). In accordance
with the Agreement, shares of common stock, $.0001 par value per share, of the
Company (the "Company Common Stock") owned by the undersigned at the Effective
Time (as defined in the Agreement) shall be converted into shares of common
stock, $.01 par value per share, of the Parent (the "Parent Common Stock"), as
described in the Agreement.
In consideration of the mutual agreements, provisions and covenants set
forth in the Agreement and hereinafter in this agreement, the undersigned
represents and agrees as follows:
1. Pooling Requirements.
--------------------
(a) The undersigned will not sell, transfer or otherwise dispose of,
or reduce his or its interest in or risk relating to, any Parent Common Stock
issued to the undersigned pursuant to the Merger, or any Parent Common Stock
issued to the undersigned upon exercise of any employee stock options or
warrants, until after such time as the Parent has published (within the meaning
of Accounting Series Release No. 130, as amended, of the Securities and Exchange
Commission) financial results covering at least 30 days of combined operations
of the Company and the Parent.
(b) Until the earlier of the Effective Time of the Merger or the
termination of the Agreement, the undersigned will not sell, transfer or
otherwise dispose of, or reduce his or its interest in or risk relating to, any
shares of Company Common Stock presently owned by the undersigned.
(c) Notwithstanding anything to the contrary in any Option Agreement
between the Company and the undersigned, if the Option Agreement provides that
the
A-59
<PAGE>
undersigned would have the right to redeem all or a portion of the underlying
option for cash, and such redemption would cause the Merger to be ineligible for
pooling of interest accounting, the Company and/or the Parent may modify such
right, to preserve the pooling of interest accounting, provided that in any
event, and notwithstanding any such modification, such underlying option shall
be converted into an option to purchase Parent Common Stock in accordance with
the terms and conditions of the Merger Agreement.
2. Rule 145. The undersigned will not offer, sell, pledge, transfer or
--------
otherwise dispose of any of the shares of Parent Common Stock issued to the
undersigned in the Merger unless at such time either: (i) such transaction shall
be permitted pursuant to the provisions of Rule 145 under the Securities Act of
1933 (the "Securities Act"), (ii) the undersigned shall have furnished to the
Parent an opinion of counsel, satisfactory to the Parent, to the effect that no
registration under the Securities Act would be required in connection with the
proposed offer, sale, pledge, transfer or other disposition; or (iii) a
registration statement under the Securities Act covering the proposed offer,
sale, pledge, transfer or other disposition shall be effective under the
Securities Act.
3. Legend. The undersigned understands that all certificates representing
------
the Parent Common Stock deliverable to the undersigned pursuant to the Merger
shall, until the occurrence of one of the events referred to in Section 2 above,
bear a legend substantially as follows:
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance
with the requirements of Rule 145 of the Securities Act of 1933, as
amended, and the other conditions specified in the Affiliates
Agreement dated as of July 18, 1996 between the holder of this
certificate and Hologic, Inc., a copy of which Agreement may be
inspected by the holder of the certificate at the offices of Hologic,
Inc.
The Parent, in its discretion and in a manner consistent with the legend
set forth above, may cause stop transfer orders to be placed with its transfer
agent with respect to the certificates for the shares of Parent Common Stock
which are required to bear the foregoing legend.
4. Tax Matters. The undersigned knows of no intention or plan on the part
-----------
of the holders of 50% or more of the outstanding Company Common Stock to sell,
transfer or otherwise dispose of the Parent Common Stock to be received by them
in the Merger.
5. Miscellaneous.
-------------
(a) This agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
A-60
<PAGE>
(b) This agreement shall be binding on the undersigned's successors
and assigns, including his heirs, executors and administrators.
The undersigned has carefully read this agreement and discussed its
requirements, to the extent the undersigned believed necessary, with its counsel
or counsel for the Parent.
Very truly yours,
________________________________________
Signature
________________________________________
Print Name
Accepted:
HOLOGIC, INC.
By:_______________________
Name:
Title:
Dated:____________________
A-61
<PAGE>
Exhibit C
---------
STOCKHOLDER OPTION AGREEMENT
AGREEMENT, dated as of July 18, 1996 among Hologic, Inc., a Delaware
corporation ("Parent"), and the holders (the "Stockholders") of the shares (the
"Shares") of common stock, $0.0001 par value ("Company Common Stock") of
FluoroScan Imaging Systems, Inc., a Delaware corporation (the "Company"), listed
on the signature pages hereof.
WHEREAS, in order to induce Parent and certain of its affiliates to enter
into that certain Agreement and Plan of Merger (the "Merger Agreement") dated
the date hereof with the Company, Parent has requested that the Stockholders,
and the Stockholders have agreed, to enter into this Agreement. All capitalized
terms not otherwise defined herein shall have the meanings ascribed to such
terms in the Merger Agreement.
WHEREAS, the Stockholders acknowledge that Parent has and will incur
significant expense in connection with the negotiation and execution of the
Merger Agreement, and the performance of its obligations and the consummation of
the transactions contemplated thereby. Parent has, among other things, retained
lawyers, accountants and investment bankers and has and will continue to divert
substantial internal corporate resources in connection with the Merger
Agreement. The Stockholders believe that the Merger, including the merger
consideration to be received by them, will be of substantial benefit to them,
desire to induce the Parent to incur the expense and effort that will be require
by the Parent to enter into the Merger Agreement and to consummate the Merger,
and understand that the Parent would not enter into the Merger Agreement if the
Stockholders did not enter into this Agreement. The Stockholders further
believe that if the Merger is not consummated under certain circumstances as
contemplated herein, the purchase of all or a portion of their Shares at the
Purchase Price set forth in the Merger Agreement and under the terms and
conditions set forth herein would be fair and equitable.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
STOCK OPTION
1.1. Grant of Stock Option. Each Stockholder hereby grants to Parent an
---------------------
irrevocable option (the "Option") to purchase all Shares presently owned by him
as set forth on the signature pages hereto and any additional Shares acquired by
such Stockholder (whether by purchase or otherwise) after the date of this
Agreement (collectively, as the same may be adjusted or modified pursuant to
Section 1.5, the "Stockholder Shares") in exchange for the number of shares of
Parent's Common Stock equal to the number of the Stockholder Shares to be
purchased by Parent multiplied by the Conversion Ratio (calculated using the
date the Option is exercised as
A-62
<PAGE>
the deemed date of the Stockholders Meeting for purposes of calculating the
Average Market Value, assuming for such purpose that the Parent Adjustment
Election has been made if the Average Market Value of the Buyer's Common Stock
as calculated herein is less than $30.17, and as adjusted pursuant to Section
1.5, the "Purchase Price"). Parent may elect, in its sole discretion, to pay all
or a portion of the Purchase Price in cash, with each share of Parent Common
Stock that would have been issued hereunder being deemed to have a value equal
to the Average Market Value calculated as set forth above.
1.2. Exercise of Option. The Option may be exercised by Parent, in whole
------------------
or in part, at any time or from time to time for a period (the "Exercise
Period") commencing upon the satisfaction of the conditions set forth in Section
1.4(i), (ii), (iii) and (iv), and ending on the later to occur of (i) twelve
(12) months from the date of the termination of the Merger Agreement, (ii)
thirty (30) days following the consummation of a Business Combination
Transaction effecting during the twelve (12) month period referred to in clause
(i), or (iii) thirty (30) days following the consummation of a Business
Combination Transaction effected after the twelve (12) month period referred to
in clause (i) , but with respect to which the Company or any of its Subsidiaries
or Affiliates has entered into a definitive agreement with a third party within
said twelve (12) month period. In the event Parent wishes to exercise the
Option for all or some of the Stockholder Shares, Parent shall send a written
notice (the "Exercise Notice") to the Stockholders specifying the total number
of Stockholder Shares to be purchased from the Stockholders pursuant to such
exercise, the date (not less than five (5) nor more than ten (10) business days
from the date of the Exercise Notice), and the time for the closing of such
purchase. The number of Stockholder Shares to be purchased from each
Stockholder with respect to such exercise shall be divided pro rata among the
Stockholders in proportion to the number of Stockholder Shares then beneficially
owned by the Stockholders, unless the parties agree to alternative allocation.
Each closing of a purchase of Stockholder Shares pursuant to this Section 1.2(a)
(a "Closing") shall take place at the offices of Katten, Muchin & Zavis in
Chicago, Illinois or at such other place as may be mutually agreeable to the
parties, on the date and at the time designated by Parent in its Exercise
Notice.
1.3. Closing. At the Closing, (a) each Stockholder shall deliver to Parent
-------
(in accordance with Parent's instructions) a certificate or certificates (the
"Certificates") representing the Stockholder Shares to be purchased from such
Stockholder, duly endorsed or accompanied by stock powers duly executed in
blank, in either case with such Stockholder's signature guaranteed by a bank,
trust company, broker dealer, credit union, savings association or other
eligible institution that is a member in good standing of a recognized signature
guarantee medallion program, and (b) Parent shall deliver to such Stockholder a
certificate or certificates representing Parent Common Stock registered in the
name of such Stockholder and/or, at the election of the Parent, cash in the
amount of the Purchase Price.
1.4. Conditions. The obligation of each Stockholder to sell Stockholder
----------
Shares at any Closing is subject to the following conditions:
(i) The conditions requiring the Company to pay the
Parent the Break-up Fee pursuant to Section 6.5 of the Merger Agreement shall
have occurred;
A-63
<PAGE>
(ii) Prior to or within twelve (12) months after the
termination of the Merger Agreement, the Company or any of its Subsidiaries, or
any Company Affiliate shall have entered into a definitive agreement with a
third party with respect to a Business Combination Transaction or a Business
Combination Transaction shall have been effected;
(iii) There shall be no preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, nor any statute, rule, regulation or order promulgated or enacted by
any governmental authority, prohibiting or otherwise restraining such exercise
of the Option; and
(iv) The representations and warranties of Parent
contained in Article III hereof shall be true and correct in all material
respects on the date thereof as if made on such date.
This Agreement shall terminate, and the Parent shall have no rights hereunder in
the event that (a) the Merger contemplated by the Merger Agreement is
consummated or (b) the Merger Agreement is terminated under circumstances that
could not give rise to the satisfaction of the condition set forth in clause
1.4(i) of this Agreement.
1.5. Adjustment Upon Changes in Capitalization or Merger. The Conversion
---------------------------------------------------
Ratio shall be subject to equitable adjustment in the event of any stock split,
stock dividend, reverse stock split, merger, consolidation, business
combination, recapitalization or similar event affecting any change in the
Parent Common Stock or the Company Common Stock between the date of this
Agreement and any Closing. Without limiting the foregoing, in the event that a
Business Combination Transaction is effected prior to the expiration of the
Exercise Period, the term Stockholder Shares shall mean all shares of capital
stock and any other consideration received by a Stockholder for his Stockholder
Shares in connection with such Business Combination Transaction.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each of the Stockholders severally represents and warrants to the Parent
that:
2.1. Valid Title. Except as contemplated by the Merger Agreement, such
-----------
Stockholder is the sole, true, lawful and beneficial owner of his Stockholder
Shares with no restrictions on such Stockholder's voting rights or rights of
disposition pertaining thereto. At any Closing, such Stockholder will convey his
Stockholder Shares being purchased free and clear of any and all claims, liens,
charges, encumbrances, security interests, any voting trust, or any other
agreement or arrangement with respect to the voting of such Shares.
2.2. Non-Contravention. The execution, delivery and performance by such
-----------------
Stockholder
A-64
<PAGE>
of this Agreement and the consummation of the transactions contemplated hereby
(i) are within such Stockholder's powers, have been duly authorized by all
necessary action (including any consultation, approval or other action by or
with any other person), (ii) require no action by or in respect of, or filing
with, any governmental body, agency, official or authority (other than as may be
required under the HSR Act as defined in Section 4.14 of the Merger Agreement),
and (iii) do not and will not contravene or constitute a default under, or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of such Stockholder under, any provision of applicable law or
regulation or of any agreement, judgment, injunction, order, decree, or other
instrument binding on such Stockholder or result in the imposition of any lien
on any asset of such Stockholder.
2.3. Binding Effect. This Agreement has been duly executed and delivered
--------------
by such Stockholder and is the valid and binding agreement of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally. If this Agreement is being
executed in a representative or fiduciary capacity, the person signing this
Agreement has full power and authority to enter into and perform such Agreement.
2.4. Total Shares. The number of Shares set forth on the signature pages
------------
hereto are the only Shares beneficially owned by such Stockholder (excluding
shares in which the Stockholder only has a voting interest, but including shares
held by or for the benefit of members of such Stockholder's immediate family).
2.5. Investment Intent. Such Stockholder understands and agrees that the
-----------------
Parent Common Stock to be issued to him upon any exercise by the Parent of the
Option will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and that any Parent Common Stock to be so acquired by such
Stockholder will be acquired by such Stockholder for his own account and not
with a view to the public distribution thereof, and will not be transferred
except in compliance with the Securities Act. Such Stockholder hereby consents
to the imposition of a legend substantially similar to the following on each
certificate for the shares of Parent Common Stock to be issued to such
Stockholder upon any exercise of the Option and agrees to abide by the
restrictions contained therein:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not
be sold, transferred or assigned unless registered under the Act or an
opinion of counsel, reasonably satisfactory to the corporation, is
obtained to the effect that such sale, transfer or assignment is
exempt from the registration requirements of the Act.
2.6. Finder's Fees. No investment banker, broker or finder is entitled to
-------------
a commission or fee from Parent or the Company in respect of this Agreement
based upon any arrangement or agreement made by or on behalf of such
Stockholder.
A-65
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Parent represents and warrants to each of the Stockholders:
3.1. Corporate Power and Authority. Parent has all requisite corporate
-----------------------------
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance by Parent of this Agreement
and the consummation by Parent of the transactions contemplated hereby have been
duly authorized by the Board of Directors of Parent and no other corporate
action on the part of Parent is necessary to authorize the execution, delivery
or performance by Parent of this Agreement and the consummation by Parent of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and is a valid and binding agreement of Parent, enforceable
against it in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally.
3.2. Acquisition for Parent's Account. Any Stockholder Shares to be
--------------------------------
acquired upon any exercise of the Option will be acquired by Parent for its own
account and not with a view to the public distribution thereof and will not be
transferred except in compliance with the Securities Act. Parent hereby
consents to the imposition of a legend substantially similar to the following on
each certificate for the shares of Company Common Stock to be issued to the
Parent upon any exercise of the Option and agrees to abide by the restrictions
contained therein:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be sold, transferred or assigned unless registered under
the Act or an opinion of counsel, reasonably satisfactory to the
corporation, is obtained to the effect that such sale, transfer or
assignment is exempt from the registration requirements of the Act.
ARTICLE IV
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders hereby covenants and agrees that:
4.1. No Proxies for or Encumbrances on Stockholder Shares. Except as
----------------------------------------------------
contemplated in the Merger Agreement, such Stockholder shall not, prior to the
earlier to occur of (i) the termination of this Agreement (as set forth in the
last sentence of Section 1.4) or (ii) the expiration of the Exercise Period (the
period of time commencing on the date of this Agreement through such earlier
date to be referred to as the "Restricted Period"), without the prior written
consent of Parent, directly or indirectly, (a) grant any proxies or enter into
any voting trust or other agreement or arrangement with respect to the voting of
any Shares or (b) sell, assign, gift
A-66
<PAGE>
transfer, encumber or otherwise dispose of any Shares during the term of this
Agreement, other than sales made in accordance with Rule 144 under the
Securities Act, as in effect on the date hereof (assuming for all purposes of
the application of such Rule that each Stockholder is an affiliate of the
Company) or sales, transfers or other dispositions made pursuant to a Business
Combination Transaction (provided, however, that the term Stockholder Shares
shall be modified to include any consideration received by a Stockholder in any
such Business Combination Transaction as set forth in Section 1.5). Prior to the
termination of the Merger Agreement, such Stockholder shall not seek or solicit
any such sale, assignment, transfer, encumbrance or other disposition or any
such contract, option or other arrangement or assignment or understanding. Such
Stockholder further agrees to notify Parent promptly and to provide all details
requested by Parent if such Stockholder shall be approached or solicited,
directly or indirectly, by any person with respect to any of the foregoing
during the Restricted Period.
4.2. Conduct of Stockholders. Such Stockholder will not (i) take, agree or
-----------------------
commit to take any action that would make any representation and warranty of
such Stockholder hereunder inaccurate in any respect as of any time prior to the
termination of this Agreement or (ii) omit, or agree or commit to omit, to take
any action necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time.
4.3 Legend. Simultaneously with the execution of this agreement, and
------
upon the acquisition of any additional Stockholder Shares during the term of
this Agreement, each Stockholder agrees cause the following legend to be set
forth on all certificates representing his Stockholder Shares:
The shares represented by this certificate are subject to certain
restrictions on transfer and rights of Hologic, Inc. as set forth in
that certain Stockholder Option Agreement dated July 18, 1996, a copy
of which will be furnished to the holder of this certificate by
Hologic, Inc. without charge upon written request to Hologic, Inc.,
and may not be sold, assigned, gifted, transferred, encumbered or
otherwise disposed of except in compliance with said Stockholder
Option Agreement.
ARTICLE V
COVENANTS OF THE BUYER
The Parent hereby covenants and agrees that:
5.1. Registration Rights. As soon as practicable after a Closing, Parent
-------------------
shall use its best efforts to cause to be registered with the Securities and
Exchange Commission under the Securities Act at least forty-three percent (43%)
of the shares of Parent Common Stock issued to each Stockholder hereunder (such
number of shares required to be registered to be reduced by any cash paid by the
Parent upon exercise of this Option with each share being deemed to be
equivalent to the Average Market Value of the Parent Common Stock, such that if
43% of the
A-67
<PAGE>
Purchase Price is paid in cash, a Stockholder shall have no Registration Rights
hereunder), on Form S-3, or any successor form thereto under the Securities Act
(the "Registration Statement"), and in any event shall file such Registration
Statement within forty-five (45) days of the Closing. Furthermore, Parent shall
use its commercially reasonable efforts to prepare and file with the Securities
and Exchange Commission any amendments or supplements to such Registration
Statement to cause the Registration Statement to become effective as soon as
practicable after such filing and to remain effective for so long as may be
reasonably necessary effect the sale of such Registrable Shares, not to exceed
sixty (60) days. The Stockholders shall furnish the Parents such information
regarding the Stockholders and the distribution proposed by the Stockholders as
the Parent may reasonably request in connection with any such registration.
5.2 Rule 16(b) Restrictions; Stockholder Loans. In the event that a
------------------------------------------
Stockholder, upon the determination of counsel to the Parent, would be subject
to liability for the sale of his Parent Common Stock acquired upon the Parent's
exercise of this Option pursuant to Section 16(b) of the Securities Exchange Act
of 1934 and the rules and regulations promulgated thereunder, Parent shall not
register such shares until the applicable holding period has expired and shall
promptly after request by a stockholder, loan such funds to such Stockholder as
are necessary and appropriate to pay income taxes (Federal and state, including
estimated taxes) with respect to the receipt of the Parent Common Stock upon
exercise by Parent of this Option, but reduced by any cash received by a
Stockholder in connection with such exercise, subject to the right of Parent to
secure the repayment of such loan pursuant to the pledge of such Parent Common
Stock and the obligation of the Stockholders to repay the loans upon sale of the
Parent Common Stock, but in no event later than the earlier of sixty (60) days
after (a) the effective date of the Registration Statement, or (b) the date the
shares first become saleable under Rule 144 under the Securities Act (including
any successor rule, "Rule 144"); provided that prior to being required to make
such loan to a Stockholder, the Stockholder must execute such instruments and
agreements evidencing its obligations pursuant thereto and the required pledge,
in form and substance reasonably satisfactory to Parent. Such loans shall be
nonrecourse loans secured only by the Buyer Common Stock.
5.3 Price Protection. Parent agrees that for any shares of Parent Common
----------------
Stock issued to a Stockholder in connection with the Parent's exercise of this
Option, Parent will guarantee that the purchase price received by the
Stockholder for the sale of such Parent Common Stock will be no less than 85%
times the Average Market Value with respect to all sales of such Parent Common
Stock made within sixty (60) days of the date that such shares are saleable,
whether pursuant to an effective Registration Statement or pursuant to Rule 144,
and provided, further, that the Stockholder sells the shares through a broker
designated by Parent. In the event that such sale yields gross proceeds of less
than the Average Market Value of such shares (calculated as set forth herein),
the Parent will promptly reimburse the Stockholder for such shortfall.
A-68
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1. Expenses. All costs and expenses incurred in connection with the
--------
parties' performance of their respective obligations under this Agreement shall
be paid by the party incurring such cost or expense.
6.2. Further Assurances. In the event the Parent exercises the Option, the
------------------
Parent and the Stockholders will each execute and deliver or cause to be
executed and delivered all further documents and instruments and use its best
efforts to secure such consents and take all such further action as may be
reasonably necessary in order to consummate the transactions contemplated hereby
or to enable the Parent and any assignee to exercise and enjoy all benefits and
rights of the Stockholders with respect to the Option and the Stockholder
Shares.
6.3. Additional Agreements. Subject to the terms and conditions of this
---------------------
Agreement, each of the parties hereto agrees to use all commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or bound,
to consummate and make effective the transactions contemplated by this
Agreement.
6.4. Specific Performance. The parties hereto agree that the Parent may
--------------------
be irreparably damaged if for any reason any Stockholder failed to sell his
Stockholder Shares upon exercise of the Option or to perform any of his other
obligations under this Agreement, and that the Parent would not have an adequate
remedy at law for money damages in such event. Accordingly, the Parent shall be
entitled to specific performance and injunctive and other equitable relief to
enforce the performance of this Agreement by each Stockholder. This provision is
without prejudice to any other rights that the Parent may have against any
Stockholder for any failure to perform its obligations under this Agreement.
6.5. Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
facsimile transmission, receipt telephonically confirmed) addressed as provided
below and if either (a) actually delivered electronically or physically at said
address, or (b) in the case of a letter, three (3) business days shall have
elapsed after the same shall have been deposited in the United States mail,
postage prepaid and registered or certified, return receipt requested or (c)
forty eight (48) hours shall have elapsed after the same shall have been sent by
nationally recognized overnight courier:
A-69
<PAGE>
If to a Stockholder to:
Arlen L. Issette
243 Bristol Court
Deerfield, IL 60015
Tel: (847) 945-0374
and
Larry S. Grossman
1625 Tall Tree Lane
Deerfield, IL 60015
Tel: (847) 948-0758
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attn: Jeffrey R. Patt, Esq.
Tel: 312-902-5200
Fax: 312-902-1061
If to the Parent, to:
Hologic, Inc.
590 Lincoln Street
Waltham, MA 02154
Attn: President
Tel: (617) 890-2300
Fax: (617) 890-8031
with a copy to:
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Attn: Lawrence M. Levy, Esquire
Tel: (617) 856-8200
Fax: (617) 856-8201
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
A-70
<PAGE>
6.6. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in this Agreement shall survive delivery of and payment for
the Stockholder Shares.
6.7. Amendments. This Agreement may not be modified, amended, altered or
----------
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.8. Successors and Assigns. This Agreement may not be assigned otherwise
----------------------
than by operation of law (a) by the Parent without the prior written consent of
the Stockholders or (b) by a Stockholder without the prior written consent of
the Parent. However, any or all rights of the Parent to receive performance
(but not the obligations of the Parent to the Stockholders hereunder) and rights
to assert claims against the Stockholders or in respect of breaches of
representations, warranties or covenants of the Stockholder hereunder, may be
assigned by the Parent to (i) any direct or indirect subsidiary, parent or other
affiliate of the Parent, or (ii) any purchaser of all or substantially all of
the assets or business of the Parent after Closing subject to such assignee's
assumption of all of the Parent's obligations hereunder. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
6.9. Governing Law.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware (other than the choice of law principles
thereof), except that any representations and warranties with respect to real
and tangible property shall be governed by and construed in accordance with the
laws of the jurisdiction where such property is situated if other than in the
State of Delaware.
(b) Any claim, action, suit or other proceeding initiated by any
party, under or in connection with this Agreement may be asserted, brought,
prosecuted and maintained in any Federal or state court in the State of
Delaware, as the party bringing such action, suit or proceeding shall elect,
having jurisdiction over the subject matter thereof, and the parties hereby
waive any and all rights to object to the laying of venue in any such court and
to any right to claim that any such court may be an inconvenient forum. Each of
the parties hereby submit themselves to the jurisdiction of each such court and
agree that service of process on them in any such action, suit or proceeding may
be effected by the means by which notices are to be given to it under this
Agreement.
6.10. Interpretation. The parties hereto acknowledge and agree that: (i)
--------------
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its revision; (ii) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
A-71
<PAGE>
6.11. Entire Agreement. This Agreement constitutes the entire agreement
----------------
of the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and undertakings, both written and oral.
6.12. Severability. In the event that any court having jurisdiction shall
------------
determine that any provision contained in this Agreement shall be unreasonable
or unenforceable in any respect, then such covenant or other provision shall be
deemed limited to the extent that such court deems it reasonable and
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall deem any such covenant or other provision wholly
unenforceable, the remaining covenants and other provisions of this Agreement
shall nevertheless remain in full force and effect.
6.13. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
HOLOGIC, INC.
By:
--------------------------------
-----------------------------
Larry S. Grossman
Shares
Owned
- -----
-----------------------------
Arlen L. Issette
Shares
Owned
- -----
A-72
<PAGE>
Exhibit D
---------
IRREVOCABLE PROXY
AND
VOTING AGREEMENT
This IRREVOCABLE PROXY AND VOTING AGREEMENT (this "Agreement") is made as
of July __, 1996, by and among Hologic, Inc., a Delaware corporation
("Hologic"), and the undersigned stockholder (the "Undersigned") of FluoroScan
Imaging Systems, Inc., a Delaware corporation (the "Company"). Reference is made
to that certain Agreement and Plan of Merger, dated the date hereof (the "Merger
Agreement"), by and among Hologic, Fenway Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Hologic ("Fenway Acquisition"), and
the Company.
RECITALS
WHEREAS, Hologic, Fenway Acquisition and the Company are contemplating a
merger of Fenway Acquisition with and into the Company (the "Merger") pursuant
to which the Company will become a wholly owned subsidiary of Hologic.
WHEREAS, the Merger is contingent upon the approval of the Merger and the
Merger Agreement by the Company's stockholders, and the Undersigned desires to
facilitate the Merger by agreeing to vote the Undersigned's shares of the
Company's capital stock and any capital stock of the Company over which the
Undersigned has voting control, including without limitation capital stock held
in the name of John Tauber and Kevin Hughes, in favor of the Merger and the
Merger Agreement.
WHEREAS, the Undersigned desires to irrevocably appoint Hologic or any
designee of Hologic as the Undersigned's lawful agent, attorney and proxy to
vote in favor of the Merger and the Merger Agreement.
AGREEMENT
NOW THEREFORE, the parties hereto agree as follows:
1. Voting Agreement.
At a special meeting of the stockholders of the Company called for the
purpose of considering the approval of the Merger and the Merger Agreement, the
Undersigned agrees to vote all of the capital stock of the Company held by the
Undersigned and any capital stock of the Company over which the Undersigned has
voting control, including without limitation capital
A-73
<PAGE>
stock held in the name of John Tauber and Kevin Hughes, in favor of the Merger
and the Merger Agreement.
2. Irrevocable Proxy.
The Undersigned hereby irrevocably appoints Hologic or any designee of
Hologic as the Undersigned's lawful agent, attorney and proxy to vote or give
consents with respect to the shares of capital stock held by the Undersigned and
any capital stock of the Company over which the Undersigned has voting control,
including without limitation capital stock held in the name of John Tauber and
Kevin Hughes, in favor of the approval of the Merger and the Merger Agreement.
The Undersigned intends this proxy to be irrevocable and coupled with an
interest. Hologic agrees that it or its designee shall vote the shares of
capital stock of the Company held by the Undersigned and any capital stock of
the Company over which the Undersigned has voting control, including without
limitation capital stock held in the name of John Tauber and Kevin Hughes, in
favor of the approval of the Merger and the Merger Agreement.
3. No Shopping.
The Undersigned shall not directly or indirectly (i) solicit, initiate or
encourage (or authorize any person to solicit, initiate or encourage) any
inquiry, proposal or offer from any person to acquire the business, property or
capital stock of the Company or any direct or indirect subsidiary thereof, or
any acquisition of a substantial equity interest in, or a substantial amount of
the assets of, the Company or any direct or indirect subsidiary thereof, whether
by merger, purchase of assets, tender offer or other transaction or (ii) subject
to the fiduciary duty of such Stockholder as a director of the Company under
applicable law, participate in any discussion or negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or participate in, facilitate or encourage any effort
or attempt by any other person to do or seek any of the foregoing.
4. Due Authorization.
By signing below, the Undersigned represents and warrants that the
Undersigned has all necessary power and authority to execute this Agreement and
to cause the Undersigned's capital stock of the Company and any capital stock of
the Company over which the Undersigned has voting control, including without
limitation capital stock held in the name of John Tauber and Kevin Hughes, to be
voted as provided herein, and the Undersigned has duly authorized, executed and
delivered this Agreement.
5. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to the principles of
conflict of laws thereof.
A-74
<PAGE>
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any and all of
the parties hereto may execute this Agreement by signing any such counterpart.
6. Termination.
This Agreement shall terminate upon the termination of the Merger Agreement
in accordance with the terms of the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
HOLOGIC, INC.
By
-----------------------------
S. David Ellenbogen
Chairman of the Board and
Chief Executive Officer
------------------------------------
Larry S. Grossman
A-75
<PAGE>
Exhibit E
---------
IRREVOCABLE PROXY
AND
VOTING AGREEMENT
This IRREVOCABLE PROXY AND VOTING AGREEMENT (this "Agreement") is made as
of July 18, 1996, by and among Hologic, Inc., a Delaware corporation
("Hologic"), and the undersigned stockholder (the "Undersigned") of FluoroScan
Imaging Systems, Inc., a Delaware corporation (the "Company"). Reference is
made to that certain Agreement and Plan of Merger, dated the date hereof (the
"Merger Agreement"), by and among Hologic, Fenway Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Hologic ("Fenway Acquisition"), and
the Company.
RECITALS
WHEREAS, Hologic, Fenway Acquisition and the Company are contemplating a
merger of Fenway Acquisition with and into the Company (the "Merger") pursuant
to which the Company will become a wholly owned subsidiary of Hologic.
WHEREAS, the Merger is contingent upon the approval of the Merger and the
Merger Agreement by the Company's stockholders, and the Undersigned desires to
facilitate the Merger by agreeing to vote the Undersigned's shares of the
Company's capital stock and any capital stock of the Company over which the
Undersigned has voting control, including without limitation capital stock held
in the name of John Tauber and Kevin Hughes, in favor of the Merger and the
Merger Agreement.
WHEREAS, the Undersigned desires to irrevocably appoint Hologic or any
designee of Hologic as the Undersigned's lawful agent, attorney and proxy to
vote in favor of the Merger and the Merger Agreement.
AGREEMENT
NOW THEREFORE, the parties hereto agree as follows:
1. Voting Agreement.
At a special meeting of the stockholders of the Company called for the
purpose of considering the approval of the Merger and the Merger Agreement, the
Undersigned agrees to vote all of the capital stock of the Company held by the
Undersigned and any capital stock of the Company over which the Undersigned has
voting control, including without limitation capital
A-76
<PAGE>
stock held in the name of John Tauber and Kevin Hughes, in favor of the Merger
and the Merger Agreement.
2. Irrevocable Proxy.
The Undersigned hereby irrevocably appoints Hologic or any designee of
Hologic as the Undersigned's lawful agent, attorney and proxy to vote or give
consents with respect to the shares of capital stock held by the Undersigned and
any capital stock of the Company over which the Undersigned has voting control,
including without limitation capital stock held in the name of John Tauber and
Kevin Hughes, in favor of the approval of the Merger and the Merger Agreement.
The Undersigned intends this proxy to be irrevocable and coupled with an
interest. Hologic agrees that it or its designee shall vote the shares of
capital stock of the Company held by the Undersigned and any capital stock of
the Company over which the Undersigned has voting control, including without
limitation capital stock held in the name of John Tauber and Kevin Hughes, in
favor of the approval of the Merger and the Merger Agreement.
3. No Shopping.
The Undersigned shall not directly or indirectly (i) solicit, initiate or
encourage (or authorize any person to solicit, initiate or encourage) any
inquiry, proposal or offer from any person to acquire the business, property or
capital stock of the Company or any direct or indirect subsidiary thereof, or
any acquisition of a substantial equity interest in, or a substantial amount of
the assets of, the Company or any direct or indirect subsidiary thereof, whether
by merger, purchase of assets, tender offer or other transaction or (ii) subject
to the fiduciary duty of such Stockholder as a director of the Company under
applicable law, participate in any discussion or negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or participate in, facilitate or encourage any effort
or attempt by any other person to do or seek any of the foregoing.
4. Due Authorization.
By signing below, the Undersigned represents and warrants that the
Undersigned has all necessary power and authority to execute this Agreement and
to cause the Undersigned's capital stock of the Company and any capital stock of
the Company over which the Undersigned has voting control, including without
limitation capital stock held in the name of John Tauber and Kevin Hughes, to be
voted as provided herein, and the Undersigned has duly authorized, executed and
delivered this Agreement.
5. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to the principles of
conflict of laws thereof.
A-77
<PAGE>
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any and all of
the parties hereto may execute this Agreement by signing any such counterpart.
6. Termination.
This Agreement shall terminate upon the termination of the Merger Agreement
in accordance with the terms of the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
HOLOGIC, INC.
By
-----------------------------
S. David Ellenbogen
Chairman of the Board and
Chief Executive Officer
-----------------------------------
Arlen L. Issette
A-78
<PAGE>
EXHIBIT F
---------
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
Agreement made this 18th day of July, 1996 by and among FluoroScan Imaging
Systems, Inc. (the "Company"), a Delaware corporation with its principal place
of business in Northbrook, Illinois, Hologic, Inc. ("Hologic"), a Delaware
corporation with its principal place of business in Waltham, Massachusetts, and
Larry S. Grossman (the "Employee"), of Deerfield, Illinois. The Company and
Hologic are collectively referred to herein as the "Employers."
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") dated the date hereof, Hologic Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Hologic, will merge with and into
the Company and the Company will become a wholly-owned subsidiary of Hologic
(the "Merger"); and
WHEREAS, Employee is a stockholder, executive officer and director of the
Company and wishes to continue to serve as an executive officer and director of
the Company; and
WHEREAS, Employee's employment with the Company is governed by an Employment
Agreement between him and the Company dated February 15, 1994 (the "Existing
Employment Agreement"); and
WHEREAS, Employee will receive substantial economic benefit as a result of
the Merger; and
WHEREAS, during the course of Employee's affiliation with the Company, the
Employee has become experienced in all aspects of the business of the Company,
and the growth and success of the business of the Company and the development of
a market for the Company's products has been due in large part to the services
and unique talents of the Employee; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee, the Company desires to
continue to employ Employee as an executive officer, and Hologic desires to
employ Employee as an executive officer, in each case on the terms and
conditions contained herein; and
WHEREAS, it is a condition of the execution of the Merger Agreement that the
Existing Employment Agreement be amended and restated as provided herein; and
WHEREAS, in his capacity as an executive officer of the Company, the
Employee has had and as an executive officer of Hologic and the Company will
have in the future, access to the Company's and Hologic's business activities,
business plans, personnel, financial status and other confidential and
proprietary information including, but not limited to, existing and potential
customers, customer information, target market areas, potential and future
products, methods, techniques and other information of and about the Company,
Hologic and their affiliates and
A-79
<PAGE>
their technology and customers, all of which are of great value to the Company
and Hologic and which are not generally known and are confidential; and
WHEREAS, the Company, Hologic and their affiliates currently, and will in
the future, manufacture and sell products to their customers on a worldwide
basis; and
WHEREAS, as a result of the Employee's present and future involvement with
and knowledge of the business of the Company, Hologic and their affiliates and
his access to present and future customers and technology of the Company and
Hologic and related customer and technological information, the Company, Hologic
and the Employee acknowledge the need for and agree to impose certain
restrictions on the ability of the Employee to compete with the Company, Hologic
and/or any of their affiliates in order to keep intact the Company's and
Hologic's business organization, to keep available their present officers,
employees and agents and to preserve the good will of all suppliers and
customers having business relations with the Company, Hologic and/or any of
their affiliates, and to preserve the good will of the Company, Hologic and/or
any affiliate thereof as a going concern, upon the terms and conditions
contained in this Agreement;
NOW, THEREFORE, in consideration of the Merger Agreement and the mutual
covenants and promises therein and herein contained, the receipt and sufficiency
of which is acknowledged, and intending to be legally bound, it is hereby agreed
by and between the parties as follows:
1 Employment; Board of Directors.
------------------------------
(a) Subject to the terms and conditions of this Agreement, during the Term
(as hereinafter defined) of this Agreement (i) the Company hereby employs
Employee as the Chairman of the Board and Chief Executive Officer of the
Company, and (ii) Hologic hereby employs Employee as a Vice President of
Hologic. Employee, together with Arlen L. Issette (unless Mr. Issette is no
longer employed by the Company), shall have general management of the day-to-day
business of the Company in the ordinary course of business and such powers as
may be reasonably incident to such responsibilities, subject in all instances to
the general supervision and direction of the Chairman of the Board and President
of Hologic, and the Board of Directors of the Company. Employee shall have
such executive duties as an officer of Hologic, consistent with the Company's
past practice, as the Board of Directors of Hologic shall determine from time
to time. Employee hereby accepts such employment.
(b) On or promptly after the Effective Date (as hereinafter defined)
Hologic in its capacity as the sole stockholder of the Company shall cause
Employee to be elected to the Board of Directors of the Company.
(c) Effective as of the Effective Date, the number of members constituting
Hologic's Board of Directors shall be increased by one (1) and Employee shall
become a member of such Board of Directors and the Company's Board of Directors.
Employee shall serve as a member of the Hologic Board of Directors until the
next annual meeting of the stockholders of Hologic and until his successor is
duly elected or appointed. Hologic shall cause Employee to be nominated
A-80
<PAGE>
for election to its Board of Directors at the annual meeting of the stockholders
of Hologic following the Effective Date; provided, however, that if, at any time
-------- -------
after the Effective Date but prior to such meeting, Employee ceases to serve as
an executive officer of either the Company or Hologic, then Hologic shall not be
obligated to cause Employee to be nominated for election to its Board of
Directors at such meeting; and, provided, further, if at any time after the
-------- -------
Effective Date but prior to the first anniversary of the Effective Date the
Employee ceases to serve as an executive officer of either the Company or
Hologic, if the Board of Directors of Hologic so requests, Employee shall
immediately tender his resignation from such Board and shall automatically be
deemed to have so resigned whether or not such resignation is tendered. If
Employee has satisfied the requirements set forth in the preceding sentence,
Hologic shall also cause Employee to be nominated for election to its Board of
Directors at the second annual meeting of the stockholders of Hologic following
the Effective Date; provided, however, that if, at any time after the Effective
-------- -------
Date but prior to the first anniversary of the such second meeting, Employee
ceases to serve as an executive officer of either the Company or Hologic, then
Hologic shall not be obligated to cause Employee to be nominated for election to
its Board of Directors at such meeting; and, provided, further, if at any time
-------- -------
after the Effective Date but prior to the second anniversary of the Effective
Date the Employee ceases to serve as an executive officer of either the Company
or Hologic, if the Board of Directors of Hologic so requests, Employee shall
immediately tender his resignation from such Board and shall automatically be
deemed to have so resigned whether or not such resignation is tendered. Except
as provided in this Section 1(c), Hologic shall have no obligation to cause
Employee to be elected or nominated for election to its Board of Directors.
(d) Hologic shall cause Employee to be indemnified as a director and
officer of Hologic and FluoroScan and to be advanced expenses to the same extent
that indemnification and advancement of expenses is provided by Hologic to its
remaining directors. An indemnification agreement to that effect will be entered
into between Hologic and the Employee at the Closing of the Merger.
2 Term. Employee's employment pursuant to the terms of this Agreement
----
shall commence upon the consummation of the Merger and the closing under the
Merger Agreement (the "Effective Date") and, subject to the rights of
termination provided for elsewhere herein, shall end on February 15, 1999 (the
"Term"). Upon the expiration of the Term, the employment relationship created
hereby shall continue on an at will basis, subject to the provisions of Sections
12, 13, 14, 16, 17, 19, 20, 23 and 27 of this Agreement. Notwithstanding the
foregoing, if the Merger Agreement is terminated prior to the consummation of
the Merger, this Agreement shall be null and void and the Existing Employment
Agreement shall automatically continue as if this Agreement were never entered
into.
3 Salary. During the term of Employee's employment pursuant to this
------
Agreement in consideration for the services to be rendered by Employee to the
Company and to Hologic, the Company shall pay Employee an annual salary equal to
Two Hundred Twenty Thousand Dollars ($220,000), subject to adjustment as set
forth below and prorated for any partial year of employment (the "Base Salary").
Commencing on or about February 15, 1997 and on or about each February 15
thereafter during the Term of this Agreement, to the extent Employee is
A-81
<PAGE>
employed hereunder, the Board of Directors of the Company shall perform a review
of Employee's Base Salary and may, in its sole discretion, make such increases
(but no decreases) in such Base Salary as the Board determines to be
appropriate. Any such increase in the Base Salary shall be effective as of
February 15 of the year in which the Board of Directors of the Company
authorizes the increase. Notwithstanding anything to the contrary contained
herein, Employee's Base Salary shall be increased annually by not less than five
percent (5%) of the Base Salary for the prior year. The annual salary shall be
paid in equal installments in accordance with the Company's regular payroll
practices, but in no event less often than monthly.
4 Discretionary Bonus. The Board of Directors of the Company or of
-------------------
Hologic, in each case, in their sole discretion, may elect to award to Employee
a bonus (the "Discretionary Bonus") in an amount to be determined by such Board
in its sole judgment. Notwithstanding the foregoing, Employee shall be entitled
to the bonus for 1996 that was previously approved by the Company's Board of
Directors and disclosed to Hologic (the "Approved Bonus").
5 Expenses. During the term of Employee's employment pursuant to this
--------
Agreement, Employee shall be reimbursed for all reasonable and ordinary,
business expenses. Employee shall furnish the Company and Hologic with the
appropriate documentation relating to such expenses and shall comply with any
additional requirements of the Company and Hologic generally applicable to the
Company's and Hologic's employees in connection therewith. In addition,
Employee shall receive a car allowance of $420 per month.
6 Fringe Benefits. During the term of Employee's employment pursuant to
---------------
this Agreement, Employee shall be entitled to the fringe benefits no less
favorable than those generally made available to officers of Hologic from time
to time including but not limited to health care coverage (for himself and his
dependents, subject to co-payment obligations on the same basis as the executive
officers of Hologic) and long term disability coverage, as approved by the Board
of Directors of the Company or Hologic; provided, however, that the fringe
-------- -------
benefits made available to Employee by the Company prior to the Merger shall be
deemed for purposes of this Section 6 to be as favorable as those made available
to officers of Hologic and Hologic may, in its sole discretion, elect to keep in
place any fringe benefit offered by the Company immediately prior to the Merger
or to replace any such benefit with a comparable fringe benefit; provided,
further, that if the Company elects to terminate its existing health care
coverage and to cover the Employee and his dependents under another health plan,
such plan will contain a waiver of preexisting medical conditions. To the
extent that the availability or amount of any fringe benefit is based upon years
of service with Hologic, in determining the amount or types of benefits to which
Employee is entitled, Employee shall receive credit for his years of service as
a director or employee of the Company prior to the Merger, subject, however, to
the terms of the applicable benefit plan.
7 Vacation. During each year of the term of Employee's employment
--------
pursuant to this Agreement, Employee shall be entitled to paid vacation in
accordance with Hologic's existing vacation practices, such vacations to be
taken at such times as not to disrupt the business of the Company. For such
purpose, Employee shall receive credit for years of service to the
A-82
<PAGE>
Company prior to the date of the Merger. Notwithstanding the foregoing, Employee
shall be entitled to a paid vacation of not less than four weeks per calendar
year.
8 Life Insurance. During the term of the Company's employment pursuant
--------------
to this Agreement, the Company shall continue to maintain two split dollar life
insurance policies on the life of Employee in the amount of One Million Dollars
($1,000,000) each; provided, however, that the maximum amount of aggregate
-------- -------
premiums that the Company shall be obligated to pay for both of the Insurance
Policies shall not exceed Thirty Thousand Dollars ($30,000) per annum pro rated
for any partial year, and Employee understands and agrees that he shall be
personally responsible for premiums in excess of such amount; provided, however,
that if such premiums shall at any time exceed $30,000 per annum, Employee may
elect to decrease the amount of coverage under such policies such that the
premium will not exceed $30,000 per annum. Employee's spouse shall be the
beneficiary of one such policy, and Employee's children shall be the beneficiary
of the other policy. Employee may designate additional or different
beneficiaries for such Insurance Policies from time to time. The Company will
maintain ownership of the policies including the cash value of the policies.
Upon termination of the Employee's employment pursuant to this Agreement, the
Employee shall have the option to purchase either or both of these policies from
the Company for the cash value thereof.
9 Full-Time Duties. Employee shall devote his full time, attention and
----------------
efforts to fulfill his duties hereunder and, to the business and interest of the
Company and Hologic, during the Term of this Agreement. Notwithstanding the
foregoing, the Employee shall be permitted to serve on the Board of Director of
Trans Leasing International, Inc. and, subject to Section 13 and 14 hereof and
to the consent of Hologic (which consent will not be unreasonably withheld), on
the Board of Directors of other companies.
10 Company and Hologic Policies and Procedures. Employee agrees to comply
-------------------------------------------
with the Company's and Hologic's regular employment policies and procedures as
they may be modified from time to time, provided that such policies and
procedures are communicated to Employee and apply to all employees, or all
executive employees, of the Company and Hologic on a uniform basis. Employee
acknowledges having received copies the Company's and Hologic's employee
handbooks which contain some of the current polices and procedures of the
Company and Hologic.
11 Early Termination.
-----------------
(a) Termination by the Company and Hologic. This Agreement shall
--------------------------------------
automatically terminate upon the death of Employee. At the election of the
Company and Hologic, Employee's employment pursuant to this Agreement shall
terminate prior to the expiration of the Term upon the earliest to occur of the
following: (i) the "long-term disability" of Employee; or (ii) the termination
of Employee by the Company for "just cause" pursuant to written notice thereof.
For purposes hereof, "long term disability" shall be deemed to have occurred
if Employee is unable to perform, after reasonable accommodations by the
Company, by reason of physical or
A-83
<PAGE>
mental incapacity, the essential functions of his duties and obligations under
this Agreement, for a total period of 180 consecutive days in any 360-day
period. The Board of Directors of the Company (the "Board") shall determine,
according to the facts then available, whether and when "long term disability"
of the Employee has occurred. Such determination shall not be arbitrary or
unreasonable, and the Board shall take into consideration the opinion of
Employee's personal physician, if reasonably available, but such determination
by the Board shall be final and binding on the parties hereto.
Notwithstanding the foregoing, if during the six month period commencing on
the date Employee is terminated due to "long term disability", the Board
determines that Employee no longer has a "long term disability" because Employee
is again able, and for the remainder of the Term will be able, to perform the
essential functions of his duties and obligations under this Agreement, the
Company will reinstate Employee's employment under the terms and conditions of
this Agreement. The Board's determination as to whether Employee no longer has
a "long term disability" shall not be arbitrary or unreasonable, and the Board
shall take into consideration the opinion of Employee's personal physician, if
reasonably available, but such determination by the Board shall be final and
biding on the parties hereto. In the event Employee is reinstated hereunder,
the Term will be deemed to recommence on the date of such reinstatement.
For purposes hereof, "just cause" shall mean the occurrence of any of the
following events during the Term:
(i) a material breach of this Agreement by Employee which is not cured
or remedied within ten (10) business days of written notice to the
Employee, indicating the manner in which such breach can be cured or
remedied, provided, however, that if such breach is not capable of
-------- -------
being cured or remedied within ten (10) business days, and if Employee
takes all reasonable steps to initiate the cure of such breach within
such 10-day period, proceeds at all times thereafter diligently and in
good faith to complete the cure thereof, and completes the cure thereof
within 20 business days of such notice, "just cause" shall not be
deemed to exist; provided, further, that if such breach is a repeated
material breach for which Employee has previously received notice, then
the Company or Hologic may terminate the employment of Employee
effective immediately;
(ii) criminal misconduct directly affecting the Company or Hologic;
(iii) unethical conduct which reflects adversely upon Employee's
honesty or integrity in the performance of his duties as an employee of
the Company or Hologic and which otherwise is materially detrimental to
the interests of the Company or Hologic;
(iv) if the Employee is found guilty or pleads nolo contendere to the
commission of a crime classified as a felony under any Federal or state
law;
(v) chronic abuse of drugs or alcohol which continues after written
notice to the
A-84
<PAGE>
Employee;
(vi) violation of any covenant contained in Section 13 or 14 hereof;
and
(vii) the discovery by the Company or Hologic of a breach or breaches
of any of the representations, warranties or covenants of the Company
contained in the Merger Agreement, which breach or breaches either
individually or in the aggregate would have a Company Material Adverse
Effect (as defined in the Merger Agreement) and which breach or
breaches were known or should have been known to Employee prior to the
closing of the Merger and were not disclosed to Hologic prior to said
closing.
Notwithstanding anything to the contrary set forth herein, at any time on or
after delivery of written notice to the Employee, the Company or Hologic may
relieve the Employee of all of his duties and responsibilities hereunder and may
relieve the Employee of authority to act on behalf of, or legally bind, the
Company and Hologic, provided, however, that any such action by the Company or
-------- -------
Hologic, other than with "just cause" or as a result of the death or "long-term
disability" of Employee shall not relieve the Company of its obligation to pay
to the Employee all compensation and benefits provided for in this Agreement for
the balance of the Term.
(b) Termination by Employee. At the election of Employee, Employee's
-----------------------
employment pursuant to this Agreement shall terminate prior to the expiration of
the Term upon the occurrence of an event constituting "good reason" (as defined
below), pursuant to written notice thereof to the Company and Hologic.
For purposes hereof, "good reason" shall mean the occurrence of any of the
following events during the Term:
(i) a material breach of this Agreement by the Company or Hologic which is
not cured or remedied within ten (10) business days of written notice to the
Company and Hologic, indicating the manner in which such breach can be cured or
remedied; provided, however, that if such breach is not capable of being cured
-----------------
or remedied within ten (10) business days, and if the Company takes all
reasonable steps to initiate the cure of such breach within such 10-day period,
proceeds at all time thereafter diligently and in good faith to complete the
cure thereof, and completes the cure thereof within 20 business days of such
notice, "good reason" shall not be deemed to exist.
(ii) any required relocation of the Employee outside of the Chicago,
Illinois metropolitan area;
(iii) any travel obligations which are materially in excess of those
required by the Company in the past;
A-85
<PAGE>
(iv) any assignment of duties inconsistent with those described in Section 1
hereof;
(v) any sale by Hologic to a third party of more than 51% of the stock or
assets of the Company to a party not controlled directly or indirectly by
Hologic; and
(vi) any change in the consistency of the Board of Directors of Hologic
whereby more than 50% of the present directors are no longer serving as
directors, unless (and only so long as) S. David Ellenbogen is still serving as
Chief Executive Officer of Hologic.
The termination by the Employee's employment hereunder for good reason shall not
relieve the Company of its obligation to pay the Employee all compensation and
benefits as provided for in this Agreement for the balance of the Term.
(c) Effect of Termination. In the event of termination of the Employee's
---------------------
employment by the Company for "just cause" or by the Employee other than for
"good reason," without limiting any other rights that the Company or Hologic may
have, Employee agrees that neither the Company or Hologic shall be required to
pay Employee any further compensation or benefits, to the extent permitted by
law, other than his Base Salary, Approved Bonus (but no other bonus) and car
allowance accrued to the effective date of termination and all reimbursable
expenses incurred prior to such date; provided, however, that if Employee
voluntarily terminates his employment hereunder without "good reason", he shall
not be entitled to any portion of his Accrued Bonus not previously paid to
Employee.
12 Intellectual Property.
---------------------
(a) Employee agrees to promptly disclose to the Company and Hologic all
ideas and suggestions coming within the scope of the business of the Company,
Hologic or any of Hologic's other subsidiaries, affiliates or successors,
whether now existing or hereafter arising and wherever located, which were
conceived or refined by him during his employment hereunder, or during his
previous affiliation with the Company, whether or not conceived or made during
regular working hours, and all such ideas and suggestions shall be the sole
property of the Company. In the event that any such idea or suggestion is
deemed by the Company or Hologic to be an invention of patentable nature,
Employee, whether or not in the employ of the Company or Hologic, will assist
the Company and Hologic in obtaining, maintaining and enforcing patents for the
invention in the United States of America and in any and all foreign countries.
In addition, Employee will supply evidence, give testimony, sign and execute all
papers and do all other legal and proper things which the Company or Hologic
reasonably may deem necessary for obtaining, maintaining, and enforcing patents
for said invention and for vesting in the Company or Hologic full title thereto.
The foregoing obligations of Employee shall be further subject to Employee being
reimbursed for his reasonable out-of-pocket expenses in connection with services
rendered by him pursuant to the previous two (2) sentences.
(b) Employee acknowledges that all works of authorship (including, without
limitation, works of authorship that contain software program code) relating to
the business of the Company and produced during Employee's employment hereunder,
or during his previous affiliation with
A-86
<PAGE>
the Company, whether they are or are not created on the Company's or Hologic's
premises or during regular working hours, are works made for hire and are the
property of the Company, and that copyrights in those works of authorship are
the property of the Company. If for any reason the Company or Hologic is not the
author of any such work of authorship for copyright purposes, Employee hereby
expressly assigns all of his rights in and to that work to the Company and
agrees to sign any instrument of specific assignment requested.
13 Noncompetition.
--------------
(a) During the period commencing on the Effective Date and ending on the
later to occur of (i) February 15, 1999, or (ii) two (2) years following the
latest date on which Employee receives payments from the Company or Hologic
hereunder (whether in connection with Employee's employment hereunder or as a
result of the termination of Employee's employment hereunder) or otherwise in
connection with Employee's employment with the Company or Hologic after the
expiration of the Term (the "Noncompetition Period"), Employee shall not,
directly or indirectly, whether as owner, partner, shareholder, director,
consultant, agent, employee, guarantor, surety or otherwise, or through any
person, consult with or in any way aid or assist any competitor of the Company,
Hologic or any affiliate or successor entity thereof (each an "Affiliate") or
engage or attempt to engage in any employment, consulting or other activity
which directly or indirectly competes with the Business of the Company, Hologic
or any Affiliate. For purposes of this Agreement, the term "employment" shall
include the performance of services by Employee as an employee, consultant,
agent, independent contractor or otherwise and the term "Business" shall mean
the research, development, manufacture, sale or distribution of any product (i)
within the X-ray bone densitometer, ultrasonic bone analyzer, biochemical marker
bone loss measurement, dual X-ray absorptiometry or low intensity, real time X-
ray imaging device industries, including without limitation medical and
commercial applications of such devices and technology and (ii) any other
business engaged in, planned or under development by the Company, Hologic or any
Affiliate with respect to which the Employee has had access to Company
Information or Customer Information (as such terms are defined in Section 14)
during the Noncompetition Period. Employee acknowledges that his participation
in the conduct of any such Business alone or with any person other than the
Company or Hologic will materially impair the Business and prospects of the
Company and Hologic.
(b) In addition to and without limiting the foregoing, during the
Noncompetition Period, Employee shall not knowingly attempt to or assist any
other person in attempting to do any of the following: (i) hire any director,
officer, employee, or agent of the Company, Hologic or any Affiliate or
encourage any such person to terminate such relationship with the Company,
Hologic or any Affiliate, as the case may be, (ii) encourage any customer,
client, supplier or other business relationship of the Company, Hologic or any
Affiliate to terminate or alter such relationship, whether contractual or
otherwise, to the disadvantage of the Company, Hologic or any Affiliate, as the
case may be (iii) encourage any prospective customer or supplier not to enter
into a business relationship with the Company,
A-87
<PAGE>
Hologic or any Affiliate; (iv) impair or attempt to impair any relationship,
contractual or otherwise, written or oral, between the Company, Hologic or any
Affiliate and any customer, supplier or other business relationship of the
Company, Hologic or any Affiliate or; (v) sell or offer to sell or assist in or
in connection with the sale to any customer or prospective customer of the
Company, Hologic or any Affiliate any products of the type sold or rendered by
the Company, Hologic or any Affiliate.
(c) Nothing in this Agreement shall preclude Employee from making passive
investments of not more than 2% of a class of securities of any business
enterprise registered under the Securities Exchange Act of 1934.
14 Protection of Proprietary Information. Employee recognizes that the
-------------------------------------
Company, Hologic and their Affiliates are engaged in a continuous program of
research and development relating to their respective business opportunities,
market forecasting, data processing, operating procedures, products, methods,
systems, techniques, machinery, tooling, designs, specifications, processes,
plans "know how" and trade secrets and that the Company, Hologic and their
Affiliates have developed information regarding costs, profits, markets,
products, customer lists, tooling, designs, plans for present and future
development and expansion into new markets and other proprietary information,
which is secret and confidential in nature and is not available to the public,
which gives the Company, Hologic and their Affiliates a special competence in
their respective and various fields of endeavor which are otherwise deemed to be
proprietary to the Company, Hologic and/or their Affiliates, all of which have
been acquired or developed at considerable expense to the Company, Hologic and
their Affiliates. Employee acknowledges that a relationship of confidence and
trust has been developed between Employee, the Company and Hologic with respect
to information of a confidential or secret nature made known to Employee during
the term of Employee's employment by the Company and Hologic. The information
referred to in the preceding two sentences is hereafter collectively referred to
as the "Company Information." Employee further recognizes that the Company,
Hologic and their Affiliates have obtained and have access to certain
information concerning their respective customers which the Company, Hologic and
such Affiliates treat and desire to continue to treat on a confidential basis
("Customer Information") and that Employee, during the course of his employment
with the Company and Hologic has and will continue to have access to such
Customer Information. Accordingly, Employee agrees that:
(a) Employee shall not disclose, either directly or indirectly, under any
circumstances (except as reasonably required in furtherance of the business of
the Company), at any time, any of the Company Information or Customer
Information to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever; provided that the Employee shall not be deemed
to be in breach of such covenant if (i) the Employee makes such disclosure
pursuant to a subpoena or order of a court of competent jurisdiction, (ii) the
Employee shall have promptly given written notice to the Company and Hologic of
the request or demand for such disclosure, (iii) the Company and Hologic have
been afforded the right to participate at their own expense in objecting to or
limiting the nature and scope of such disclosure and (iv) the disclosure is
subject to all judicial protection available for like material, such as
protective orders and sealed records of proceedings. Employee further agrees
not to use any of the Company information or Customer Information in any
business which is competitive with the Business of the Company, Hologic or any
Affiliate.
A-88
<PAGE>
(b) Employee further agrees that at any time upon the request of the
Company or Hologic, Employee will deliver to the Company all documents and data
of any nature in his possession or control pertaining to any Company Information
and Customer Information.
15 Other Agreements. Employee represents and warrants to the Company and
----------------
Hologic, that as of the Effective Date Employee is not under any obligation to
any person or entity which is inconsistent with or in conflict with any of the
terms of this Agreement or which would prevent, limit or impair in any way
Employee's performance of all the terms of this Agreement and Employee agrees
not to enter into any agreement, either written or oral, in conflict herewith.
16 Remedies. The Employee expressly acknowledges that, in the event that
--------
the provisions of Sections 12, 13 or 14 hereof are breached, the Company and
Hologic will suffer damages incapable of ascertainment and will be irreparably
damaged if any provision of such Sections is not enforced. Therefore, should
any dispute arise with respect to the breach or threatened breach of any
provision of said Sections 12, 13 or 14, the Employee agrees and consents that,
in addition to any and all other remedies available to the Company and Hologic,
an injunction or restraining order or other equitable relief may be issued or
ordered by a court of competent jurisdiction restraining any breach of
threatened breach of any of such provisions. The Employee consents that, for
purposes of any action initiated against the Employee hereunder, service of
process may be effected by certified mail or overnight receipted courier as set
forth in Section 20 hereof and shall be acceptable and adequate to satisfy the
requirement that service of process be served on the Employee in connection
therewith. All such proceedings may be pursued and such remedies sought and
obtained concurrently or consecutively at the election of the Company.
17 Integral Part of Transaction; Protection of Interests. Pursuant to the
-----------------------------------------------------
Merger Agreement, Hologic is acquiring all of the business and goodwill of the
Company, and the undertakings and covenants of the Employee contained in this
Agreement are an integral part of the transactions set forth in said Merger
Agreement. The Employee acknowledges, warrants and agrees that the restrictive
covenants contained in Sections 12, 13 and 14 of this Agreement are necessary
for the protection of the business investment by Hologic in the Merger and the
legitimate business interest of the Company, Hologic and their Affiliates,
respectively, and are reasonable in scope and content. The Employee further
acknowledges and agrees that the territorial, time and other limitations imposed
hereunder upon the current and future business activities of the Employee are
reasonable and properly required for the adequate protection of the business
investment by Hologic in the Merger and the business affairs of the Company,
Hologic and their Affiliates, respectively, and in the event any such
territorial, time or other limitations are found to be unreasonable by a court
of competent jurisdiction, the Employee agrees and submits to the reduction of
such territorial, time or other limitations to such an area, period or otherwise
as the court may determine to be reasonable. In the event that any limitation
contained in Sections 12, 13 or 14 of this Agreement is found to be unreasonable
or otherwise invalid in whole or in part in any jurisdiction, the Employee
agrees that such limitations shall be and remain valid in all other
jurisdictions.
A-89
<PAGE>
18 Joint and Several Obligations. Hologic shall be jointly and severally
-----------------------------
liable for the performance of the obligations of the Company under this
Agreement.
19 Severability. The parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law.
20 Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing and if either (a)
actually delivered (electronically or physically) at said address, or (b) in the
case of a letter, three (3) business days shall have elapsed after the same
shall have been deposited in the United States mail, postage prepaid and
registered or certified, return receipt requested or forty eight (48) hours
shall have elapsed after the same shall have been sent by nationally recognized
overnight courier, or (c) when transmission acknowledged by telephonic receipt
if sent by facsimile:
If to Employee, to:
Larry S. Grossman
1625 Tall Tree
Deerfield, IL 60015
Tel: 847-948-0758
Fax: ____________
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attn: Jeffrey R. Patt, Esq.
Tel: 312-902-5200
Fax: 312-902-1061
If to the Company or Hologic to:
Hologic, Inc.
590 Lincoln Street
Waltham, MA 02154
Attn: President
Tel: 617-890-2300
Fax: 617-890-8031
A-90
<PAGE>
with a copy to:
Lawrence M. Levy, Esquire
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Tel: 617 856-8200
Tel: 617 856-8201
and in any case at such other address as the addressee shall have specified
by written notice.
21 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof and will supersede
and replace any existing employment agreement between the Employee and the
Company upon the consummation of the Merger, which is hereby canceled effective
as of the Effective Date without further obligation or liability of the Company,
and all promises, representations, understandings, warranties and agreements
with reference to the subject matter hereof and inducements to the making of
this Agreement relied upon by any party hereto have been expressed.
22 Assignability. Employee may not assign his duties hereunder or his
-------------
rights in this Agreement to any other person or entity.
23 Governing Law; Venue.
--------------------
(a) This Agreement shall be exclusively governed by and construed in
accordance with the laws of the State of Illinois (other than the choice of law
principles thereof).
(b) Any claim, dispute or controversy between the parties relating to this
Agreement (including but not limited to a dispute over whether "just cause" or
"good reason" for termination exists) which the parties are unable to resolve
amicably shall be determined by binding arbitration before a single arbitrator
exclusively in Chicago, Illinois, conducted under the Commercial Arbitration
Rules of the American Arbitration Association. Judgment on the award rendered
may be entered by any court of competent jurisdiction.
(c) Notwithstanding the foregoing, the Company or Hologic may bring and
prosecute an action for equitable relief (but not for damages) for any breach or
alleged breach of the provisions of Section 12, 13 or 14 of this Agreement in
any Federal or state court in the Commonwealth of Massachusetts, as the party
bringing such action, shall elect, having jurisdiction over the subject matter
thereof, and the parties hereby waive any and all rights to object to the laying
of venue in any such court and to any right to claim that any such court may be
an inconvenient forum. Each of the parties hereby submit themselves to the
jurisdiction of each such court for the purpose described in Section 23(c) and
agree that service of process on
A-91
<PAGE>
them in any such action, may be effected by the means by which notices are to be
given to it under this Agreement.
24 Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
25 Effect of Headings. Any title of an article or section heading herein
------------------
contained is for convenience of reference only, and shall not affect the meaning
of construction of any of the provisions hereof.
26 Successors and Assigns. All covenants, promises and agreements by or
----------------------
on behalf of the parties contained in this Agreement shall inure to the benefit
of, and be binding upon, the successors and assigns of the parties hereto.
27 Interpretation. The parties hereto acknowledge and agree that: (i)
--------------
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its revision; (ii) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representative.
HOLOGIC, INC.
By: _______________________
Name:
Title:
FLUOROSCAN IMAGING SYSTEMS, INC.
By: _______________________
Name:
Title:
EMPLOYEE:
______________________________
Larry S. Grossman
A-92
<PAGE>
EXHIBIT G
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
Agreement made this 18th__ day of July, 1996 by and among FluoroScan Imaging
Systems, Inc. (the "Company"), a Delaware corporation with its principal place
of business in Northbrook, Illinois, Hologic, Inc. ("Hologic"), a Delaware
corporation with its principal place of business in Waltham, Massachusetts, and
Arlen L. Issette (the "Employee"), of Deerfield, Illinois. The Company and
Hologic are collectively referred to herein as the "Employers."
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") dated the date hereof, Hologic Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Hologic, will merge with and into
the Company and the Company will become a wholly-owned subsidiary of Hologic
(the "Merger"); and
WHEREAS, Employee is a stockholder, executive officer and director of the
Company and wishes to continue to serve as an executive officer and director of
the Company; and
WHEREAS, Employee's employment with the Company is governed by an Employment
Agreement between him and the Company dated February 15, 1994 (the "Existing
Employment Agreement"); and
WHEREAS, Employee will receive substantial economic benefit as a result of
the Merger; and
WHEREAS, during the course of Employee's affiliation with the Company, the
Employee has become experienced in all aspects of the business of the Company,
and the growth and success of the business of the Company and the development of
a market for the Company's products has been due in large part to the services
and unique talents of the Employee; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee, the Company desires to
continue to employ Employee as an executive officer, and Hologic desires to
employ Employee as an executive officer, in each case on the terms and
conditions contained herein; and
WHEREAS, it is a condition of the execution of the Merger Agreement that the
Existing Employment Agreement be amended and restated as provided herein; and
WHEREAS, in his capacity as an executive officer of the Company, the
Employee has had and as an executive officer of Hologic and the Company will
have in the future, access to the Company's and Hologic's business activities,
business plans, personnel, financial status and other confidential and
proprietary information including, but not limited to, existing and potential
customers, customer information, target market areas, potential and future
products, methods, techniques and other information of and about the Company,
Hologic and their
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 1
Execution Copy
A-93
<PAGE>
affiliates and their technology and customers, all of which are of great value
to the Company and Hologic and which are not generally known and are
confidential; and
WHEREAS, the Company, Hologic and their affiliates currently, and will in
the future, manufacture and sell products to their customers on a worldwide
basis; and
WHEREAS, as a result of the Employee's present and future involvement with
and knowledge of the business of the Company, Hologic and their affiliates and
his access to present and future customers and technology of the Company and
Hologic and related customer and technological information, the Company, Hologic
and the Employee acknowledge the need for and agree to impose certain
restrictions on the ability of the Employee to compete with the Company, Hologic
and/or any of their affiliates in order to keep intact the Company's and
Hologic's business organization, to keep available their present officers,
employees and agents and to preserve the good will of all suppliers and
customers having business relations with the Company, Hologic and/or any of
their affiliates, and to preserve the good will of the Company, Hologic and/or
any affiliate thereof as a going concern, upon the terms and conditions
contained in this Agreement;
NOW, THEREFORE, in consideration of the Merger Agreement and the mutual
covenants and promises therein and herein contained, the receipt and sufficiency
of which is acknowledged, and intending to be legally bound, it is hereby agreed
by and between the parties as follows:
1 Employment; Board of Directors.
------------------------------
(a) Subject to the terms and conditions of this Agreement, during the Term
(as hereinafter defined) of this Agreement (i) the Company hereby employs
Employee as the President and Chief Operating Officer of the Company, and (ii)
Hologic hereby employs Employee as a Vice President of Hologic. Employee,
together with Larry S. Grossman (unless Mr. Grossman is no longer employed by
the Company), shall have general management of the day-to-day business of the
Company in the ordinary course of business and such powers as may be reasonably
incident to such responsibilities, subject in all instances to the general
supervision and direction of the Chairman of the Board and President of Hologic,
and the Board of Directors of the Company. Employee shall have such executive
duties as an officer of Hologic, consistent with the Company's past practice,
as the Board of Directors of Hologic shall determine from time to time.
Employee hereby accepts such employment.
(b) On or promptly after the Effective Date (as hereinafter defined)
Hologic in its capacity as the sole stockholder of the Company shall cause
Employee to be elected to the Board of Directors of the Company.
(c) Effective as of the Effective Date, Employee shall become a member of
the Company's Board of Directors. Employee shall serve as a member of the
Company Board of Directors until the next annual meeting of the stockholders of
the Company and until his successor is duly elected or appointed. The Company
shall cause Employee to be nominated for
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 2
Execution Copy
A-94
<PAGE>
election to its Board of Directors at the annual meeting of the stockholders of
the Company following the Effective Date; provided, however, that if, at any
-------- -------
time after the Effective Date but prior to such meeting, Employee ceases to
serve as an executive officer of the Company, then the Company shall not be
obligated to cause Employee to be nominated for election to its Board of
Directors at such meeting; and, provided, further, if at any time after the
-------- -------
Effective Date but prior to the first anniversary of the Effective Date the
Employee ceases to serve as an executive officer of the Company , if the Board
of Directors of the Company so requests, Employee shall immediately tender his
resignation from such Board and shall automatically be deemed to have so
resigned whether or not such resignation is tendered. If Employee has satisfied
the requirements set forth in the preceding sentence, the Company shall also
cause Employee to be nominated for election to its Board of Directors at the
second annual meeting of the stockholders of the Company following the Effective
Date; provided, however, that if, at any time after the Effective Date but prior
-------- -------
to the first anniversary of the such second meeting, Employee ceases to serve as
an executive officer of the Company, then the Company shall not be obligated to
cause Employee to be nominated for election to its Board of Directors at such
meeting; and, provided, further, if at any time after the Effective Date but
-------- -------
prior to the second anniversary of the Effective Date the Employee ceases to
serve as an executive officer of the Company, if the Board of Directors of the
Company so requests, Employee shall immediately tender his resignation from such
Board and shall automatically be deemed to have so resigned whether or not such
resignation is tendered. Except as provided in this Section 1(c), the Company
shall have no obligation to cause Employee to be elected or nominated for
election to its Board of Directors.
2 Term. Employee's employment pursuant to the terms of this Agreement
----
shall commence upon the consummation of the Merger and the closing under the
Merger Agreement (the "Effective Date") and, subject to the rights of
termination provided for elsewhere herein, shall end on February 15, 1999 (the
"Term"). Upon the expiration of the Term, the employment relationship created
hereby shall continue on an at will basis, subject to the provisions of Sections
12, 13, 14, 16, 17, 19, 20, 23 and 27 of this Agreement. Notwithstanding the
foregoing, if the Merger Agreement is terminated prior to the consummation of
the Merger, this Agreement shall be null and void and the Existing Employment
Agreement shall automatically continue as if this Agreement were never entered
into.
3 Salary. During the term of Employee's employment pursuant to this
------
Agreement in consideration for the services to be rendered by Employee to the
Company and to Hologic, the Company shall pay Employee an annual salary equal to
Two Hundred Twenty Thousand Dollars ($220,000), subject to adjustment as set
forth below and prorated for any partial year of employment (the "Base Salary").
Commencing on or about February 15, 1997 and on or about each February 15
thereafter during the Term of this Agreement, to the extent Employee is employed
hereunder, the Board of Directors of the Company shall perform a review of
Employee's Base Salary and may, in its sole discretion, make such increases (but
no decreases) in such Base Salary as the Board determines to be appropriate.
Any such increase in the Base Salary shall be effective as of February 15 of the
year in which the Board of Directors of the Company authorizes the increase.
Notwithstanding anything to the contrary contained herein,
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 3
Execution Copy
A-95
<PAGE>
Employee's Base Salary shall be increased annually by not less than five
percent (5%) of the Base Salary for the prior year. The annual salary shall
be paid in equal installments in accordance with the Company's regular payroll
practices, but in no event less often than monthly.
4 Discretionary Bonus. The Board of Directors of the Company or of
-------------------
Hologic, in each case, in their sole discretion, may elect to award to Employee
a bonus (the "Discretionary Bonus") in an amount to be determined by such Board
in its sole judgment. Notwithstanding the foregoing, Employee shall be entitled
to the bonus for 1996 that was previously approved by the Company's Board of
Directors and disclosed to Hologic (the "Approved Bonus").
5 Expenses. During the term of Employee's employment pursuant to this
--------
Agreement, Employee shall be reimbursed for all reasonable and ordinary,
business expenses. Employee shall furnish the Company and Hologic with the
appropriate documentation relating to such expenses and shall comply with any
additional requirements of the Company and Hologic generally applicable to the
Company's and Hologic's employees in connection therewith. In addition,
Employee shall receive a car allowance of $420 per month.
6 Fringe Benefits. During the term of Employee's employment pursuant to
---------------
this Agreement, Employee shall be entitled to the fringe benefits no less
favorable than those generally made available to officers of Hologic from time
to time including but not limited to health care coverage (for himself and his
dependents, subject to co-payment obligations on the same basis as the executive
officers of Hologic) and long term disability coverage, as approved by the Board
of Directors of the Company or Hologic; provided, however, that the fringe
-------- -------
benefits made available to Employee by the Company prior to the Merger shall be
deemed for purposes of this Section 6 to be as favorable as those made available
to officers of Hologic and Hologic may, in its sole discretion, elect to keep in
place any fringe benefit offered by the Company immediately prior to the Merger
or to replace any such benefit with a comparable fringe benefit; provided,
further, that if the Company elects to terminate its existing health care
coverage and to cover the Employee and his dependents under another health plan,
such plan will contain a waiver of preexisting medical conditions. To the
extent that the availability or amount of any fringe benefit is based upon years
of service with Hologic, in determining the amount or types of benefits to which
Employee is entitled, Employee shall receive credit for his years of service as
a director or employee of the Company prior to the Merger, subject, however, to
the terms of the applicable benefit plan.
7 Vacation. During each year of the term of Employee's employment
--------
pursuant to this Agreement, Employee shall be entitled to paid vacation in
accordance with Hologic's existing vacation practices, such vacations to be
taken at such times as not to disrupt the business of the Company. For such
purpose, Employee shall receive credit for years of service to the Company prior
to the date of the Merger. Notwithstanding the foregoing, Employee shall be
entitled to a paid vacation of not less than four weeks per calendar year.
8 Life Insurance. During the term of the Company's employment pursuant
--------------
to this Agreement, the Company shall continue to maintain two split dollar life
insurance policies on
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 4
Execution Copy
A-96
<PAGE>
the life of Employee in the amount of One Million Dollars ($1,000,000) each;
provided, however, that the maximum amount of aggregate premiums that the
- -------- -------
Company shall be obligated to pay for both of the Insurance Policies shall not
exceed Thirty Thousand Dollars ($30,000) per annum pro rated for any partial
year, and Employee understands and agrees that he shall be personally
responsible for premiums in excess of such amount; provided, however, that if
such premiums shall at any time exceed $30,000 per annum, Employee may
elect to decrease the amount of coverage under such policies such that the
premium will not exceed $30,000 per annum. Employee's spouse shall be the
beneficiary of one such policy, and Employee's children shall be the beneficiary
of the other policy. Employee may designate additional or different
beneficiaries for such Insurance Policies from time to time. The Company will
maintain ownership of the policies including the cash value of the policies.
Upon termination of the Employee's employment pursuant to this Agreement, the
Employee shall have the option to purchase either or both of these policies from
the Company for the cash value thereof.
9 Full-Time Duties. Employee shall devote his full time, attention and
----------------
efforts to fulfill his duties hereunder and, to the business and interest of the
Company and Hologic, during the Term of this Agreement. Notwithstanding the
foregoing, subject to Section 13 and 14 hereof and to the consent of the Company
(which consent will not be unreasonably withheld), the Employee shall be
permitted to serve on the Board of Directors of other companies.
10 Company and Hologic Policies and Procedures. Employee agrees to comply
-------------------------------------------
with the Company's and Hologic's regular employment policies and procedures as
they may be modified from time to time, provided that such policies and
procedures are communicated to Employee and apply to all employees, or all
executive employees, of the Company and Hologic on a uniform basis. Employee
acknowledges having received copies the Company's and Hologic's employee
handbooks which contain some of the current policies and procedures of the
Company and Hologic.
11 Early Termination.
-----------------
(a) Termination by the Company and Hologic. This Agreement shall
--------------------------------------
automatically terminate upon the death of Employee. At the election of the
Company and Hologic, Employee's employment pursuant to this Agreement shall
terminate prior to the expiration of the Term upon the earliest to occur of the
following: (i) the "long-term disability" of Employee; or (ii) the termination
of Employee by the Company for "just cause" pursuant to written notice thereof.
For purposes hereof, "long term disability" shall be deemed to have occurred
if Employee is unable to perform, after reasonable accommodations by the
Company, by reason of physical or mental incapacity, the essential functions of
his duties and obligations under this Agreement, for a total period of 180
consecutive days in any 360-day period. The Board of Directors of the Company
(the "Board") shall determine, according to the facts then available, whether
and when "long term disability" of the Employee has occurred. Such
determination
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 5
Execution Copy
A-97
<PAGE>
shall not be arbitrary or unreasonable, and the Board shall take into
consideration the opinion of Employee's personal physician, if reasonably
available, but such determination by the Board shall be final and binding on the
parties hereto.
Notwithstanding the foregoing, if during the six month period commencing on
the date Employee is terminated due to "long term disability", the Board
determines that Employee no longer has a "long term disability" because Employee
is again able, and for the remainder of the Term will be able, to perform the
essential functions of his duties and obligations under this Agreement, the
Company will reinstate Employee's employment under the terms and conditions of
this Agreement. The Board's determination as to whether Employee no longer has
a "long term disability" shall not be arbitrary or unreasonable, and the Board
shall take into consideration the opinion of Employee's personal physician, if
reasonably available, but such determination by the Board shall be final and
biding on the parties hereto. In the event Employee is reinstated hereunder,
the Term will be deemed to recommence on the date of such reinstatement.
For purposes hereof, "just cause" shall mean the occurrence of any of the
following events during the Term:
(i) a material breach of this Agreement by Employee which is not
cured or remedied within ten (10) business days of written notice to
the Employee, indicating the manner in which such breach can be cured
or remedied, provided, however, that if such breach is not capable of
-------- -------
being cured or remedied within ten (10) business days, and if Employee
takes all reasonable steps to initiate the cure of such breach within
such 10-day period, proceeds at all times thereafter diligently and in
good faith to complete the cure thereof, and completes the cure thereof
within 20 business days of such notice, "just cause" shall not be
deemed to exist; provided, further, that if such breach is a repeated
material breach for which Employee has previously received notice, then
the Company or Hologic may terminate the employment of Employee
effective immediately;
(ii) criminal misconduct directly affecting the Company or Hologic;
(iii) unethical conduct which reflects adversely upon Employee's
honesty or integrity in the performance of his duties as an employee of
the Company or Hologic and which otherwise is materially detrimental to
the interests of the Company or Hologic;
(iv) if the Employee is found guilty or pleads nolo contendere to the
commission of a crime classified as a felony under any Federal or state
law;
(v) chronic abuse of drugs or alcohol which continues after written
notice to the Employee;
(vi) violation of any covenant contained in Section 13 or 14 hereof;
and
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 6
Execution Copy
A-98
<PAGE>
(vii) the discovery by the Company or Hologic of a breach or breaches
of any of the representations, warranties or covenants of the Company
contained in the Merger Agreement, which breach or breaches either
individually or in the aggregate would have a Company Material Adverse
Effect (as defined in the Merger Agreement) and which breach or
breaches were known or should have been known to Employee prior to the
closing of the Merger and were not disclosed to Hologic prior to said
closing.
Notwithstanding anything to the contrary set forth herein, at any time on or
after delivery of written notice to the Employee, the Company or Hologic may
relieve the Employee of all of his duties and responsibilities hereunder and may
relieve the Employee of authority to act on behalf of, or legally bind, the
Company and Hologic, provided, however, that any such action by the Company or
-------- -------
Hologic, other than with "just cause" or as a result of the death or "long-term
disability" of Employee shall not relieve the Company of its obligation to pay
to the Employee all compensation and benefits provided for in this Agreement for
the balance of the Term.
(b) Termination by Employee. At the election of Employee, Employee's
-----------------------
employment pursuant to this Agreement shall terminate prior to the expiration of
the Term upon the occurrence of an event constituting "good reason" (as defined
below), pursuant to written notice thereof to the Company and Hologic.
For purposes hereof, "good reason" shall mean the occurrence of any of the
following events during the Term:
(i) a material breach of this Agreement by the Company or Hologic which
is not cured or remedied within ten (10) business days of written notice to the
Company and Hologic, indicating the manner in which such breach can be cured or
remedied; provided, however, that if such breach is not capable of being cured
-----------------
or remedied within ten (10) business days, and if the Company takes all
reasonable steps to initiate the cure of such breach within such 10-day period,
proceeds at all time thereafter diligently and in good faith to complete the
cure thereof, and completes the cure thereof within 20 business days of such
notice, "good reason" shall not be deemed to exist.
(ii) any required relocation of the Employee outside of the Chicago,
Illinois metropolitan area;
(iii) any travel obligations which are materially in excess of those
required by the Company in the past;
(iv) any assignment of duties inconsistent with those described in Section
1 hereof;
(v) any sale by Hologic to a third party of more than 51% of the stock or
assets of the Company to a party not controlled directly or indirectly by
Hologic; and
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 7
Execution Copy
A-99
<PAGE>
(vi) any change in the consistency of the Board of Directors of Hologic
whereby more than 50% of the present directors are no longer serving as
directors, unless (and only so long as) S. David Ellenbogen is still serving as
Chief Executive Officer of Hologic.
The termination by the Employee's employment hereunder for good reason shall not
relieve the Company of its obligation to pay the Employee all compensation and
benefits as provided for in this Agreement for the balance of the Term.
(c) Effect of Termination. In the event of termination of the Employee's
---------------------
employment by the Company for "just cause" or by the Employee other than for
"good reason," without limiting any other rights that the Company or Hologic may
have, Employee agrees that neither the Company or Hologic shall be required to
pay Employee any further compensation or benefits, to the extent permitted by
law, other than his Base Salary, Approved Bonus (but no other bonus) and car
allowance accrued to the effective date of termination and all reimbursable
expenses incurred prior to such date; provided, however, that if Employee
voluntarily terminates his employment hereunder without "good reason", he shall
not be entitled to any portion of his Accrued Bonus not previously paid to
Employee.
12 Intellectual Property.
---------------------
(a) Employee agrees to promptly disclose to the Company and Hologic all
ideas and suggestions coming within the scope of the business of the Company,
Hologic or any of Hologic's other subsidiaries, affiliates or successors,
whether now existing or hereafter arising and wherever located, which were
conceived or refined by him during his employment hereunder, or during his
previous affiliation with the Company, whether or not conceived or made during
regular working hours, and all such ideas and suggestions shall be the sole
property of the Company. In the event that any such idea or suggestion is
deemed by the Company or Hologic to be an invention of patentable nature,
Employee, whether or not in the employ of the Company or Hologic, will assist
the Company and Hologic in obtaining, maintaining and enforcing patents for the
invention in the United States of America and in any and all foreign countries.
In addition, Employee will supply evidence, give testimony, sign and execute all
papers and do all other legal and proper things which the Company or Hologic
reasonably may deem necessary for obtaining, maintaining, and enforcing patents
for said invention and for vesting in the Company or Hologic full title thereto.
The foregoing obligations of Employee shall be further subject to Employee being
reimbursed for his reasonable out-of-pocket expenses in connection with services
rendered by him pursuant to the previous two (2) sentences.
(b) Employee acknowledges that all works of authorship (including, without
limitation, works of authorship that contain software program code) relating to
the business of the Company and produced during Employee's employment hereunder,
or during his previous affiliation with the Company, whether they are or are not
created on the Company's or Hologic's premises or during regular working hours,
are works made for hire and are the property of the Company, and that copyrights
in those works of authorship are the property of
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 8
Execution Copy
A-100
<PAGE>
the Company. If for any reason the Company or Hologic is not the author of
any such work of authorship for copyright purposes, Employee hereby expressly
assigns all of his rights in and to that work to the Company and agrees to
sign any instrument of specific assignment requested.
13 Noncompetition.
--------------
(a) During the period commencing on the Effective Date and ending on the
later to occur of (i) February 15, 1999, or (ii) two (2) years following the
latest date on which Employee receives payments from the Company or Hologic
hereunder (whether in connection with Employee's employment hereunder or as a
result of the termination of Employee's employment hereunder) or otherwise in
connection with Employee's employment with the Company or Hologic after the
expiration of the Term (the "Noncompetition Period"), Employee shall not,
directly or indirectly, whether as owner, partner, shareholder, director,
consultant, agent, employee, guarantor, surety or otherwise, or through any
person, consult with or in any way aid or assist any competitor of the Company,
Hologic or any affiliate or successor entity thereof (each an "Affiliate") or
engage or attempt to engage in any employment, consulting or other activity
which directly or indirectly competes with the Business of the Company, Hologic
or any Affiliate. For purposes of this Agreement, the term "employment" shall
include the performance of services by Employee as an employee, consultant,
agent, independent contractor or otherwise and the term "Business" shall mean
the research, development, manufacture, sale or distribution of any product (i)
within the X-ray bone densitometer, ultrasonic bone analyzer, biochemical marker
bone loss measurement, dual X-ray absorptiometry or low intensity, real time X-
ray imaging device industries, including without limitation medical and
commercial applications of such devices and technology and (ii) any other
business engaged in, planned or under development by the Company, Hologic or any
Affiliate with respect to which the Employee has had access to Company
Information or Customer Information (as such terms are defined in Section 14)
during the Noncompetition Period. Employee acknowledges that his participation
in the conduct of any such Business alone or with any person other than the
Company or Hologic will materially impair the Business and prospects of the
Company and Hologic.
(b) In addition to and without limiting the foregoing, during the
Noncompetition Period, Employee shall not knowingly attempt to or assist any
other person in attempting to do any of the following: (i) hire any director,
officer, employee, or agent of the Company, Hologic or any Affiliate or
encourage any such person to terminate such relationship with the Company,
Hologic or any Affiliate, as the case may be, (ii) encourage any customer,
client, supplier or other business relationship of the Company, Hologic or any
Affiliate to terminate or alter such relationship, whether contractual or
otherwise, to the disadvantage of the Company, Hologic or any Affiliate, as the
case may be (iii) encourage any prospective customer or supplier not to enter
into a business relationship with the Company, Hologic or any Affiliate; (iv)
impair or attempt to impair any relationship, contractual or otherwise, written
or oral, between the Company, Hologic or any Affiliate and any customer,
supplier or other business relationship of the Company, Hologic or any Affiliate
or; (v) sell or offer to sell or assist in or in connection with the sale to any
customer or prospective customer of the Company, Hologic or any Affiliate any
products of the type sold or rendered by the Company, Hologic or any Affiliate.
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 9
Execution Copy
A-101
<PAGE>
(c) Nothing in this Agreement shall preclude Employee from making passive
investments of not more than 2% of a class of securities of any business
enterprise registered under the Securities Exchange Act of 1934.
14 Protection of Proprietary Information. Employee recognizes that the
-------------------------------------
Company, Hologic and their Affiliates are engaged in a continuous program of
research and development relating to their respective business opportunities,
market forecasting, data processing, operating procedures, products, methods,
systems, techniques, machinery, tooling, designs, specifications, processes,
plans "know how" and trade secrets and that the Company, Hologic and their
Affiliates have developed information regarding costs, profits, markets,
products, customer lists, tooling, designs, plans for present and future
development and expansion into new markets and other proprietary information,
which is secret and confidential in nature and is not available to the public,
which gives the Company, Hologic and their Affiliates a special competence in
their respective and various fields of endeavor which are otherwise deemed to be
proprietary to the Company, Hologic and/or their Affiliates, all of which have
been acquired or developed at considerable expense to the Company, Hologic and
their Affiliates. Employee acknowledges that a relationship of confidence and
trust has been developed between Employee, the Company and Hologic with respect
to information of a confidential or secret nature made known to Employee during
the term of Employee's employment by the Company and Hologic. The information
referred to in the preceding two sentences is hereafter collectively referred to
as the "Company Information." Employee further recognizes that the Company,
Hologic and their Affiliates have obtained and have access to certain
information concerning their respective customers which the Company, Hologic and
such Affiliates treat and desire to continue to treat on a confidential basis
("Customer Information") and that Employee, during the course of his employment
with the Company and Hologic has and will continue to have access to such
Customer Information. Accordingly, Employee agrees that:
(a) Employee shall not disclose, either directly or indirectly, under any
circumstances (except as reasonably required in furtherance of the business of
the Company), at any time, any of the Company Information or Customer
Information to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever; provided that the Employee shall not be deemed
to be in breach of such covenant if (i) the Employee makes such disclosure
pursuant to a subpoena or order of a court of competent jurisdiction, (ii) the
Employee shall have promptly given written notice to the Company and Hologic of
the request or demand for such disclosure, (iii) the Company and Hologic have
been afforded the right to participate at their own expense in objecting to or
limiting the nature and scope of such disclosure and (iv) the disclosure is
subject to all judicial protection available for like material, such as
protective orders and sealed records of proceedings. Employee further agrees
not to use any of the Company information or Customer Information in any
business which is competitive with the Business of the Company, Hologic or any
Affiliate.
(b) Employee further agrees that at any time upon the request of the
Company or Hologic, Employee will deliver to the Company all documents and data
of any nature in his possession or control pertaining to any Company Information
and Customer Information.
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 10
Execution Copy
A-102
<PAGE>
15 Other Agreements. Employee represents and warrants to the Company and
----------------
Hologic, that as of the Effective Date Employee is not under any obligation to
any person or entity which is inconsistent with or in conflict with any of the
terms of this Agreement or which would prevent, limit or impair in any way
Employee's performance of all the terms of this Agreement and Employee agrees
not to enter into any agreement, either written or oral, in conflict herewith.
16 Remedies. The Employee expressly acknowledges that, in the event that
--------
the provisions of Sections 12, 13 or 14 hereof are breached, the Company and
Hologic will suffer damages incapable of ascertainment and will be irreparably
damaged if any provision of such Sections is not enforced. Therefore, should
any dispute arise with respect to the breach or threatened breach of any
provision of said Sections 12, 13 or 14, the Employee agrees and consents that,
in addition to any and all other remedies available to the Company and Hologic,
an injunction or restraining order or other equitable relief may be issued or
ordered by a court of competent jurisdiction restraining any breach of
threatened breach of any of such provisions. The Employee consents that, for
purposes of any action initiated against the Employee hereunder, service of
process may be effected by certified mail or overnight receipted courier as set
forth in Section 20 hereof and shall be acceptable and adequate to satisfy the
requirement that service of process be served on the Employee in connection
therewith. All such proceedings may be pursued and such remedies sought and
obtained concurrently or consecutively at the election of the Company.
17 Integral Part of Transaction; Protection of Interests. Pursuant to the
-----------------------------------------------------
Merger Agreement, Hologic is acquiring all of the business and goodwill of the
Company, and the undertakings and covenants of the Employee contained in this
Agreement are an integral part of the transactions set forth in said Merger
Agreement. The Employee acknowledges, warrants and agrees that the restrictive
covenants contained in Sections 12, 13 and 14 of this Agreement are necessary
for the protection of the business investment by Hologic in the Merger and the
legitimate business interest of the Company, Hologic and their Affiliates,
respectively, and are reasonable in scope and content. The Employee further
acknowledges and agrees that the territorial, time and other limitations imposed
hereunder upon the current and future business activities of the Employee are
reasonable and properly required for the adequate protection of the business
investment by Hologic in the Merger and the business affairs of the Company,
Hologic and their Affiliates, respectively, and in the event any such
territorial, time or other limitations are found to be unreasonable by a court
of competent jurisdiction, the Employee agrees and submits to the reduction of
such territorial, time or other limitations to such an area, period or otherwise
as the court may determine to be reasonable. In the event that any limitation
contained in Sections 13 or 14 of this Agreement is found to be unreasonable or
otherwise invalid in whole or in part in any jurisdiction, the Employee agrees
that such limitations shall be and remain valid in all other jurisdictions.
18 Joint and Several Obligations. Hologic shall be jointly and severally
-----------------------------
liable for the performance of the obligations of the Company under this
Agreement.
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 11
Execution Copy
A-103
<PAGE>
19 Severability. The parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law.
20 Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing and if either (a)
actually delivered (electronically or physically) at said address, or (b) in the
case of a letter, three (3) business days shall have elapsed after the same
shall have been deposited in the United States mail, postage prepaid and
registered or certified, return receipt requested or forty eight (48) hours
shall have elapsed after the same shall have been sent by nationally recognized
overnight courier, or (c) when transmission acknowledged by telephonic receipt
if sent by facsimile:
If to Employee, to:
Arlen L. Issette
243 Bristol Court
Deerfield, IL 60015
Tel: 847-945-0374
Fax:
---------------
with a copy to:
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attn: Jeffrey R. Patt, Esq.
Tel: 312-902-5200
Fax: 312-902-1061
If to the Company or Hologic to:
Hologic, Inc.
590 Lincoln Street
Waltham, MA 02154
Attn: President
Tel: 617-890-2300
Fax: 617-890-8031
with a copy to:
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 12
Execution Copy
A-104
<PAGE>
Lawrence M. Levy, Esquire
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Tel: 617 856-8200
Tel: 617 856-8201
and in any case at such other address as the addressee shall have specified
by written notice.
21 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof and will supersede
and replace any existing employment agreement between the Employee and the
Company upon the consummation of the Merger, which is hereby canceled effective
as of the Effective Date without further obligation or liability of the Company,
and all promises, representations, understandings, warranties and agreements
with reference to the subject matter hereof and inducements to the making of
this Agreement relied upon by any party hereto have been expressed.
22 Assignability. Employee may not assign his duties hereunder or his
-------------
rights in this Agreement to any other person or entity.
23 Governing Law; Venue.
--------------------
(a) This Agreement shall be exclusively governed by and construed in
accordance with the laws of the State of Illinois (other than the choice of law
principles thereof).
(b) Any claim, dispute or controversy between the parties relating to this
Agreement (including but not limited to a dispute over whether "just cause" or
"good reason" for termination exists) which the parties are unable to resolve
amicably shall be determined by binding arbitration before a single arbitrator
exclusively in Chicago, Illinois, conducted under the Commercial Arbitration
Rules of the American Arbitration Association. Judgment on the award rendered
may be entered by any court of competent jurisdiction.
(c) Notwithstanding the foregoing, the Company or Hologic may bring and
prosecute an action for equitable relief (but not for damages) for any breach or
alleged breach of the provisions of Section 12, 13 or 14 of this Agreement in
any Federal or state court in the Commonwealth of Massachusetts, as the party
bringing such action, shall elect, having jurisdiction over the subject matter
thereof, and the parties hereby waive any and all rights to object to the laying
of venue in any such court and to any right to claim that any such court may be
an inconvenient forum. Each of the parties hereby submit themselves to the
jurisdiction of each such court for the purpose described in Section 23(c) and
agree that service of process on them in any such action, may be effected by the
means by which notices are to be given to it under this Agreement.
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 13
Execution Copy
A-105
<PAGE>
24 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
25 Effect of Headings. Any title of an article or section heading herein
------------------
contained is for convenience of reference only, and shall not affect the meaning
of construction of any of the provisions hereof.
26 Successors and Assigns. All covenants, promises and agreements by or
----------------------
on behalf of the parties contained in this Agreement shall inure to the benefit
of, and be binding upon, the successors and assigns of the parties hereto.
27 Interpretation. The parties hereto acknowledge and agree that: (i)
--------------
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its revision; (ii) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representative.
HOLOGIC, INC.
By:
------------------------
Name:
Title:
FLUOROSCAN IMAGING SYSTEMS, INC.
By:
------------------------
Name:
Title:
EMPLOYEE:
---------------------------
Arlen L. Issette
- -------------------------------------------------------------------------------
ALI Employment Agreement Page 14
Execution Copy
A-106
<PAGE>
EXHIBIT H
---------
AFFILIATE'S AGREEMENT
July 18, 1996
Hologic, Inc.
590 Lincoln Street
Waltham, Massachusetts 02154
Dear Sirs:
Reference is made to an Agreement and Plan of Merger dated as of the date
hereof (the "Agreement") has been entered into by and between Hologic, Inc. (the
"Parent"), Fenway Acquisition Corp. (the "Acquisition Subsidiary") and
FluoroScan Imaging Systems, Inc. (the "Company"). The Agreement provides for
the merger of the Acquisition Subsidiary with and into the Company (the
"Merger").
In consideration of the mutual agreements, provisions and covenants set
forth in the Agreement and hereinafter in this agreement, the undersigned
represents and agrees as follows:
1. Pooling Requirements.
--------------------
(a) The undersigned will not sell, transfer or otherwise dispose of,
or reduce his or its interest in or risk relating to, any shares of the
Parent's common stock, $.01 par value per share ("Parent Common Stock"),
presently owned by the undersigned, or any Parent Common Stock issued to the
undersigned upon exercise of any employee stock options or warrants, until after
such time as the Parent has published (within the meaning of Accounting Series
Release No. 130, as amended, of the Securities and Exchange Commission)
financial results covering at least 30 days of combined operations of the
Company and the Parent.
(b) Until the earlier of the Effective Time (as defined in the
Agreement) of the Merger or the termination of the Agreement, the undersigned
will not sell, transfer or otherwise dispose of, or reduce his or its interest
in or risk relating to any shares of the Company's common stock, $.0001 per
value per share, presently owned by the undersigned.
2. Miscellaneous.
-------------
(a) This agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
A-107
<PAGE>
(b) This agreement shall be binding on the undersigned's successors
and assigns, including his heirs, executors and administrators.
The undersigned has carefully read this agreement and discussed its
requirements, to the extent the undersigned believed necessary, with its counsel
or counsel for the Parent.
Very truly yours,
----------------------------------
Signature
----------------------------------
Print Name
Accepted:
HOLOGIC, INC.
By:
-------------------------------
Name:
Title:
Dated:
--------------
A-108
<PAGE>
EXHIBIT I
Opinion of Company's Counsel
----------------------------
The following opinions and confirmations will be subject to customary
assumptions and qualifications, including, but not limited to, compliance with
all applicable fiduciary duties.
1. Each of the Company and its Subsidiaries is a corporation duly
incorporated, existing and in good standing under the laws of the
jurisdiction of its incorporation, with the corporate power and authority
to own or lease its properties and to conduct its business as presently
conducted.
2. The Company is qualified to do business and is in good standing as a
foreign corporation in the States of Illinois and Michigan.
3. The Company has the corporate power and authority to enter into the
Agreement and to perform its obligations thereunder. The execution and
delivery by the Company of each of the Agreement and the Employment
Agreements have been duly authorized by all necessary corporate action,
including with regard to the Agreement, stockholder action, on the part of
the Company, has been duly executed and delivered by the Company, and
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
4. The authorized capital stock of the Company consists of (i) 1,000,000
shares of preferred stock, $.0001 par value, none of which are issued and
outstanding, and (ii) 14,000,000 shares of common stock, $.0001 par value,
of which ____ shares were issued and outstanding at the close of business
on ________________[one business day prior to the date hereof] and no
shares are held in treasury of the Company. All such outstanding shares
have been duly authorized and validly issued, and are fully paid and
nonassessable.
5. Except as disclosed in the Merger Agreement or the Company Disclosure
Letter, the execution and delivery of the Agreement and consummation of the
Merger and the other transactions contemplated thereby will not result in
(i) a breach or violation of any of the terms or provisions of or
constitute a default under or violate or conflict with the Charter or
Bylaws of the Company or any of its Subsidiaries, (ii) to our knowledge, a
breach or violation of any provision of any material contract or agreement
(a) listed in the Company Disclosure Schedule or as an exhibit or
incorporated by reference as an exhibit to the Company's 1995 Annual Report
on Form 10-K or any subsequent Company SEC filings, to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound (the "Material Contracts"), or give rise to a right
of termination of any such Material Contract or (iii) the creation of any
lien on any property of the Company, any of its Subsidiaries or the
Surviving Corporation (except due to acts of Parent or the Acquisition
Subsidiary). To our knowledge, the Company is not a party to, or expressly
bound by, any judgment, injunction or decree of any court or governmental
authority which would restrict or interfere with the performance by the
Company of its obligations under the
A-109
<PAGE>
Agreement. We express no opinion as to any agreement between the Company
and NASA, which is the subject of a opinion of special government contract
counsel.
6. To our knowledge, all authorizations, consents and approvals of all federal
and state governmental agencies required in order to permit the
consummation of the Merger and the other transactions contemplated by the
Agreement on the part of the Company and each of its Subsidiaries have been
obtained, except for (i) the filing of the Certificate of Merger with the
Delaware Secretary of State, and (ii) approvals and registrations which if
not obtained would not have a Company Material Adverse Effect. We express
no opinion as to any agreement between the Company and NASA, which may be
the subject of a opinion of special government contract counsel.
7. Each of the Employment Agreement, Stock Option Agreement, and Voting Rights
Agreement entered into in connection with the Agreement (collectively the
"Ancillary Agreements") has been duly executed and delivered by Larry S.
Grossman and/or Arlen L. Issette (each a "Company Affiliate"), constitutes
the legal, valid and binding obligation of the applicable Company
Affiliate, enforceable against such Company Affiliate in accordance with
its terms.
8. The performance of the Ancillary Agreements and the consummation of the
transactions therein provided will not, to our knowledge, result in a
breach or violation of any provision of any material contract or instrument
to which any Company Affiliate is bound. To our knowledge, no Company
Affiliate is a party to, or expressly bound by, any judgment, injunction or
decree of any court of government authority which would restrict or
interfere with the performance by any Company Affiliate of its obligations
under the Ancillary Agreements to which it is a party.
9. Upon the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, the Merger will be effective under Delaware law.
10. To our knowledge, the NASA License Agreement is a valid and binding
agreement of the Company and, assuming the due authorization and execution
thereof by NASA and that the NASA License Agreement is in full force and
effect, is enforceable by the Company in accordance with its terms, and the
consummation of the Merger will not result in a breach or violation of the
Agreement or the right of NASA to terminate the agreement. [This opinion
may be rendered by special government contract counsel.]
11. To our knowledge, the Company has filed with the Commission all forms,
statements, reports and documents (including all exhibits, amendments, and
supplements thereto) required to be filed by it under each of the
Securities Act and the Exchange Act since July 11, 1994, and the respective
rules and regulations thereunder, all of which complied as to form in all
material respects with all applicable requirements of the appropriate Act
and the rules and regulations thereunder, it being understood that we do
not express any opinion with respect to the operating statistics, financial
statements, financial schedules and other financial and statistical data
included therein.
A-110
<PAGE>
12. The Proxy Statement/Prospectus complied as to form in all material respects
with the requirements of the Securities Act and the Exchange Act and with
the rules and regulations of the Commission thereunder, it being understood
that we do not express any opinion with respect to the operating
statistics, financial statements, financial schedules and other financial
and statistical data included therein, or any information relating to or
furnished by the Parent or the Acquisition Subsidiary.
The following numbered paragraphs may be in the form of a confirmation in the
Opinion Letter and not a numbered opinion:
1. We have participated in conferences with Larry S. Grossman and Arlen L.
Issette, the Chairman of the Board and President of the Company and other
representatives of the Company, representatives of the Parent,
representatives of Brown, Rudnick, Freed & Gesmer, legal counsel for the
Parent, representatives of BDO Seidman, LLP, the independent public
accountants for the Company, and representatives of Arthur Andersen LLP,
the independent public accountants for the Parent, at which conferences we
made inquiries of such representatives of the Company and the
representatives of the Company's independent public accountants, and
discussed the contents of the Registration Statement, the Proxy
Statement/Prospectus and related matters and, although we are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in any Registration Statement or the
Proxy Statement/Prospectus, on the basis of the foregoing, and solely with
respect to the Company and its Subsidiaries, no facts have come our
attention which give us reason to believe that the Registration Statement,
as of its effective date under the Securities Act, as of the meeting date
of the shareholders of the Company (the "Meeting Date"), and as of the date
hereof, contained or contains any untrue statement of a material fact or
omitted or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Proxy Statement/Prospectus, as of its mailing date to the shareholders of
the Company, the Meeting Date and the date hereof, included or includes any
untrue statement of a material fact or omitted or omits 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, it being
understood that we do not express any opinion with respect to the operating
statistics, financial statements, financial schedules and other financial
and statistical data included therein, or any information concerning or
furnished by the Parent or the Acquisition Subsidiary.
2. To our knowledge, based solely on an officer's certificate, except as set
forth in the Agreement or the Company Disclosure Schedule and as
contemplated by the Agreement, there are no (i) outstanding or authorized
subscriptions, warrants, options or other rights granted by the Company or
binding upon the Company to purchase or acquire, or preemptive rights with
respect to the issuance or sale of, the capital stock of the Company or
which obligate or may obligate the Company to issue any additional shares
of its capital stock or any securities convertible into or evidencing the
right to subscribe for any shares of its capital stock, (ii) other
securities of the Company directly or indirectly convertible into or
exchangeable for shares of capital stock of the Company, (iii) restrictions
on the transfer of
A-111
<PAGE>
the Company's capital stock, (iv) voting rights with respect to the capital
stock of the Company, or (v) stock appreciation, phantom stock or similar
rights with respect to the Company. To our knowledge, except as set forth
in the Agreement or the Company Disclosure Schedule, no holders of
securities of the Company have rights to register such securities for sale.
3. To our knowledge, based solely on a review of our firm's litigation docket
and an officer's certificate, except as disclosed in the Company Disclosure
Schedule, there are no claims, actions, suits, arbitrations, proceedings or
investigations pending (or, to our knowledge, overtly threatened in
writing) against the Company or any of its Subsidiary, and there are no
outstanding court orders, court decrees, or court stipulations to which the
Company or any of its Subsidiary is a party or by which any of their
respective assets are bound, any of which (a) if adversely determined would
materially restrict or interfere with the Agreement or the transactions
contemplated thereby, or (b) materially restrict the present business
properties, operations, prospects, assets, revenues or condition (financial
or otherwise) of the Company or any of its Subsidiaries, or (c) would,
individually or in the aggregate, have a Company Material Adverse Effect or
materially impair or preclude the Company's ability to consummate the
Merger or the other transactions contemplated thereby.
A-112
<PAGE>
EXHIBIT J
---------
July 18, 1996
FORM OF OPINION
RE INTELLECTUAL PROPERTY
Acting as special counsel, we have reviewed specified aspects of the
intellectual property rights ("the Intellectual Property") of Fluoroscan
Imaging Systems, Inc. ("Fluoroscan").
In our review, we have relied upon the accuracy of factual information
provided by or for Fluoroscan. We have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us, the conformity to
the originals of all documents submitted to us as copies, and the authority of
the originals of the copied documents. As to questions of fact material to our
opinion, we have relied on public records when available and representations of
representatives of Fluoroscan, when relevant facts were not or could not be
independently established.
It is our opinion based upon the foregoing that the Intellectual Property
consists of:
1. License rights under U.S. Patents Nos. 4,142,101 ("'101 patent") and
its Reexamination Certificate B1, 4,510,476 ("'476 patent") and
4,517,472 ("'472 patent"), together with a license to use and sell
under any foreign counterparts of these patents, products which
Fluoroscan has manufactured in the United States;
2. The likely right to continue to use the name FLUOROSCAN in connection
with Fluoroscan's current line of products; and
3. Such trade secrets as Fluoroscan has developed in its business and has
maintained as such.
We are not aware of any other intellectual property rights which Fluoroscan
owns, and our search in public databases has not revealed any such other rights.
A-113
<PAGE>
A. PATENT RIGHTS
1. Licensed Patents
As of today, any required maintenance fees for the '101, '476 and '472
patents have been paid, and the patents are subsisting.
The '101, '476 and '472 patents are assigned on their face to the United
States of America as represented by the Administrator for the National
Aeronautics and Space Administration ("NASA"). The records in the U-S-Patent and
Trademark Office, show that as of today these three patents are still assigned
to NASA. We have not uncovered information that would indicate otherwise.
In our opinion, the three U.S. patents under which Fluoroscan is licensed
expire on the following dams::
'101 patent -- July 20, 1997
'476 patent -- June 21, 2003
'472 patent -- July 06, 2003
In summary:
1. The '101 patent, as reexamined, pertains to and claims as the
protected invention, a special image intensifier/screen combination,
either alone or as a part of an x-ray system;
2. The '476 patent pertains to and claims as the protected invention, an
electrical transformer that can be used in a power supply for an x-ray
tube to step up relatively low voltage to relatively high voltage
(such as to the voltage level needed to power an x-ray robe); and
3. The '472 patent pertains to and claims as the protected invention, a
high voltage power supply circuit which can power an x-ray robe.
In our opinion, the current Fluoroscan products use the inventions recited
in these three U.S. patents.
A-114
<PAGE>
We base our opinion regarding the licensed patents expressed above on our
study of the patents and their file histories, including prior an of record, on
our inspection of records maintained by the United States Patent and Trademark
Office, and on our inspection of the current Fluoroscan products and on
additional information supplied by Fluoroscan and its counsel.
2. Patent Scope
The '101 patent in our opinion covers an image intensifier/screen
combination having specified characteristics, and x-ray system using such a
combination, but may not cover certain other types of image intensifiers that
can be used in conjunction with screens in x-ray systems.
The '476 and '472 patents in our opinion cover transformers and power
supply, respectively, such as used in Fluoroscan's current products, but may not
cover certain other transformers and power supplies that can be used in similar
products.
We base our opinion regarding patent scope on our study of the patents, of
their file histories, of prior art of record therein, of additional prior art
uncovered in an independent search which we carried out, of the material
retained by Fluoroscan's counsel from the litigation involving the '101 patents,
and on our inspection of Fluoroscan's products and additional information
supplied by Fluoroscan and its counsel.
3. Patent Validity
In our opinion, the '101, '476 and '472 patents are valid.
We base our opinion on validity on our study of the patents, of their file
histories, of prior art of record therein, of additional prior art uncovered in
an independent search which we carried out, of the material retained by
Fluoroscan's counsel from the litigation involving the '101 patents, and on
additional information supplied by Fluoroscan and its counsel.
4 Patent Enforceability
In our opinion, the '101, '476 and '472 patents are enforceable.
A-115
<PAGE>
We base our opinion on enforceability on our study of the patents, of their
file histories, of prior art of record therein, of additional prior art
uncovered in an independent search which we carried out, of the material
retained by Fluoroscan's counsel from the litigation involving the '101 patents,
and on additional information supplied by Fluoroscan and its counsel.
5. Subsisting License
In our opinion, the license rights granted to Fluoroscan under the '101,
'476 and '472 patents subsist.
The license rights under the '101 patent are for a specified technology
("nonradioactive isotope" uses) and specified claims of the patent. The license
rights under the '476 and '472 patents are subject to a prior license granted in
the field of "Lixiscope" uses. Further, the license fights under all three
patents require manufacture in the U.S. There is no exclusivity in other
countries. The licensor can terminate for cause, and Fluoroscan can terminate
at will upon notice.
The license fights give Fluoroscan a qualified exclusivity in that: (a)
the licensor can practice the patents at will and can make, use and sell such
products in competition with Fluoroscan; (b) the licensor can license others
under these patents if it determines that this would be required by factors such
as public health and the national interest; (c) Fluoroscan has sublicensed its
rights under the '101 patent (and the Reexamination Certificate for that patent)
to Xi Tec, Inc. ("Xi Tec") for the life of the '101 patent, pursuant to the
settlement of a lawsuit involving the '101 patent; and (d) the license to
Fluoroscan under the '476 and '472 patents is subject to a prior field-of-use
license to Hopkins International Company ("Hopkins").
The license rights under each respective patent expire when the patent
expires, unless earlier terminated (e.g., for breach).
6. Fluoroscan's Royalty Obligations
In our opinion, the license rights under the three U.S. patents obligate
Fluoroscan to pay royalty. The royalty is at the rate of 4.5% while Fluoroscan's
products use all three patents. After the '101 patent expires (or if
Fluoroscan's
A-116
<PAGE>
products no longer use it, the royalty is at the rate of 3.5 % for the use of
either or both of the '476 and '472 patents.
We base this opinion on our study of the license documents supplied to us
by Fluoroscan's counsel.
7. Royalty Due To Fluoroscan
In our opinion, Xi Tec, Inc. ("Xi Tee") has a sublicense under the '101
patent which obligates it to pay Fluoroscan a royalty of $1350 (and possibly an
additional $300) for each Xi Tec machine using the '101 patent, using the '101
patent expires in approximately one year. (In turn, Fluoroscan is obligated to
pay its licensor $300 of the royalty received per Xi Tec machine.)
We base this information on our study of the license and sublicense
documents and information supplied to us by Fluoroscan and its counsel, and of
the material respecting the litigation involving the '101 patent retained by
Fluoroscan's counsel.
B. RIGHTS IN THE NAME, FLUOROSCAN
In our opinion, Fluoroscan likely has the right to continue using the name
Fluoroscan in connection with its current line of products, because it has used
it without challenge for an extended time period and for other reasons. However,
Fluoroscan has not been able to obtain a registration for that name because of a
prior use or registration of the same name by another.
We base this opinion on documents and information supplied to us by
Fluoroscan and its counsel and our search of public records.
C. TRADE SECRETS
In our opinion, Fluoroscan owns certain trade secrets related to its
products and business, and has maintained them as such.
We base this opinion on documents and information supplied to us by
Fluoroscan employees and counsel.
A-117
<PAGE>
D. EXPOSURE TO INTELLECTUAL PROPERTY OF OTHERS
In our opinion, Fluoroscan's current and past products do not infringe
intellectual property of others which we have been able to uncover in our search
of public records.
We base this opinion on our study of Fluoroscan's current and past
products, on the results of our search in public records, and on information
supplied to us by Fluoroscan and its counsel, including representations thereof
that Fluoroscan is unaware of any allegations that its products have infringed
intellectual property of others.
E. GENERAL
We are members of the bar of the State of New York and we do not express
any opinion with respect to the law of any other jurisdiction other than the law
of the State of New York and the federal law of the United States.
This opinion is based on the facts and law in existence on this date, and
any change in such conditions might require changes in the above opinion.
This opinion is delivered to you in connection with the transaction for
which you have requested it and it may not be relied upon by any other party or
person for any other purpose.
Very truly yours,
COOPER & DUNHAM LLP
A-118
<PAGE>
EXHIBIT K
---------
Opinion of Parent's Counsel
---------------------------
The following opinions and confirmations will be subject to customary
assumptions and qualifications.
1. Each of the Parent and the Acquisition Subsidiary is a corporation duly
incorporated, existing and in good standing under the laws of the State of
Delaware. The Parent has the corporate power and authority to own or lease
its properties and to conduct is business as presently conducted.
2. Each of the Parent and the Acquisition Subsidiary has the corporate power
and authority to enter into the Agreement and to perform its respective
obligations thereunder. The execution and delivery by the Parent of the
Agreement has been duly authorized by all necessary corporate action on the
part of the Parent, has been duly executed and delivered by the Parent, and
constitutes the legal, valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its terms. The execution
and delivery by the Acquisition Subsidiary of the Agreement has been duly
authorized by all necessary corporate action on the part of the Acquisition
Subsidiary, has been duly executed and delivered by the Acquisition
Subsidiary, and constitutes the legal, valid and binding obligation of the
Acquisition Subsidiary, enforceable against the Acquisition Subsidiary in
accordance with its terms.
3. The authorized capital stock of the Parent consists of (i) 1,622,685 shares
of preferred stock, $.01 par value, none of which are outstanding, and (ii)
30,000,000 shares of common stock, $.01 par value, of which ____ shares
were issued and outstanding at the close of business on _______ [one
business day prior to the date hereof]. Each share of Parent Common Stock
is, and each share of Parent Common Stock to be issued to the stockholders
of the Company at the Effective Time will be accompanied by one Parent
Purchase Right. All of the issued and outstanding shares of Parent Common
Stock are duly authorized, validly issued, fully paid and nonassessable.
All of the Merger Shares will be, when issued in accordance with the
Agreement, duly authorized, validly issued, fully paid and nonassessable.
4. Except as disclosed in the Merger Agreement, the execution and delivery of
the Agreement and consummation of the Merger and the other transactions
contemplated thereby will not result in (i) a breach or violation of any of
the terms or provisions of or constitute a default under or violate or
conflict with the Charter or Bylaws of the Parent or the Acquisition
Subsidiary, (ii) to our knowledge, a breach or violation of any provision
of any material contract or agreement attached as or incorporated by
reference as an exhibit to the Company's 1995 Annual Report on Form 10-K or
any subsequent Company SEC filings to which the Parent or the Acquisition
Subsidiary is a party or by which the Parent or the Acquisition Subsidiary
is bound (the "Material Contracts"), or give rise to the right of
termination of any such Material Contract or (iii) the creation of any lien
on any property of the Parent or Acquisition
A-119
<PAGE>
Subsidiary (except due to acts of Parent or the Acquisition Subsidiary). To
our knowledge, neither the Parent or the Acquisition Subsidiary is a party
to, or expressly bound by, any judgment, injunction or decree of any court
of governmental authority which would restrict or interfere with the
performance by the Company of its obligations under the Agreement.
5. To our knowledge, all authorizations, consents and approvals of all federal
and state governmental agencies required in order to permit the
consummation of the Merger and the other transactions contemplated by the
Agreement on the part of the Parent and the Acquisition Subsidiary have
been obtained, except for (i) the filing of the Certificate of Merger with
the Delaware Secretary of State, and (ii) the approvals and registrations
which if not obtained would not have a Parent Material Adverse Effect.
6. Upon the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, the Merger will be effective under Delaware law.
7. To our knowledge, Parent has filed with the Commission all forms,
statements, reports and documents (including all exhibits, amendments, and
supplements thereto) required to be filed by it under each of the
Securities Act and the Exchange Act since January 1, 1994, and the
respective rules and regulations thereunder, all of which complied as to
form in all material respects with all applicable requirements of the
appropriate Act and the rules and regulations thereunder, it being
understood that we do not need to express any opinion with respect to the
operating statistics, financial statements, financial schedules and other
financial and statistical data included therein.
8. The Registration Statement has become effective under the Securities Act
and to the best of our knowledge no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose are pending or threatened by the Commission.
9. The Registration Statement and the Proxy Statement/Prospectus included
therein comply as to form in all material respects with the requirements of
the Securities Act and the Exchange Act and with the rules and regulations
of the Commission thereunder, it being understood that we do not need to
express any opinion with respect to the operating statistics, financial
statements, financial schedules and other financial and statistical data
included therein or any information relating to or furnished by the Company
or any of its Subsidiaries.
The following numbered paragraphs may be in the form of a confirmation in the
Opinion Letter and not a numbered opinion:
1. We have participated in conferences with S. David Ellenbogen and Glenn P.
Muir, the Chairman and Chief Financial Officer of the Parent, respectively,
and other representatives of the Parent, representatives of the Company,
representatives of Katten, Muchin & Zavis, counsel to the Company,
representatives of BDO Seidman, LLP, the independent public accountants for
the Company, and representatives of Arthur Andersen LLP, the independent
public accountants for the Parent, at which conferences we made inquiries
of such representatives of the Parent and the representatives of the
Parent's independent public
A-120
<PAGE>
accountants, and discussed the contents of the Registration Statement, the
Proxy Statement/Prospectus and related matters and, although we are not
passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in any Registration
Statement or the Proxy Statement/Prospectus, on the basis of the foregoing,
and solely with respect to the Parent and the Acquisition Subsidiary, no
facts have come to our attention which give us reason to believe that the
Registration Statement, as of its effective date under the Securities Act,
as of the meeting date of the shareholders of the Company in connection
with the Transaction (the "Meeting Date") and as of the date hereof
contained or contains any untrue statement of a material fact or omitted or
omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, or that the Proxy
Statement/Prospectus, as of its mailing date to the shareholders of the
Company, the Meeting Date and the date hereof, included or includes any
untrue statement of a material fact or omitted or omits 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, it being
understood that we do not need to express any opinion with respect to the
operating statistics, financial statements, financial schedules and other
financial and statistical data included therein, or any information
concerning or furnished by the Company.
2. To our knowledge, based solely on a review of our firm's case intake and an
officer's certificate, except as disclosed in the Agreement, there are no
claims, actions, suits, arbitrations, proceedings or investigations pending
(or, to our knowledge, overtly threatened in writing) against the Parent or
the Acquisition Subsidiary, and there are no outstanding court orders,
court decrees, or court stipulations to which the Parent or the Acquisition
Subsidiary is a party or by which any of their respective assets are bound,
any of which (a) if adversely determined would materially restrict or
interfere with the Agreement or the transactions contemplated thereby, or
(b) materially restrict the present business properties, operations,
prospects, assets, revenues or condition (financial or otherwise) of the
Parent or the Acquisition Subsidiaries, or (c) would, individually or in
the aggregate, have a Parent Material Adverse Effect or materially impair
or preclude the Parent's or the Acquisition Subsidiary's ability to
consummate the Merger or the other transactions contemplated thereby.
A-121
<PAGE>
[LETTERHEAD OF RODMAN & RENSHAW, INC. APPEARS HERE]
July 18, 1996
Board of Directors
FluoroScan Imaging Systems, Inc.
650-B Anthony Trail
Northbrook, IL 60062
Gentlemen:
We understand that FluoroScan Imaging Systems, Inc., a Delaware corporation
("FluoroScan" or the "Company"), intends, subject to approval by its Board of
Directors, to enter into an Agreement and Plan of Merger substantially in the
form delivered to us on July 18, 1996 (the "Agreement of Merger") with a newly
formed acquisition corporation, a Delaware corporation (the "Sub"), and a
wholly-owned subsidiary of Hologic, Inc., a Delaware corporation ("Hologic"),
relating to the proposed merger of the Company with and into Sub (FluoroScan
being the surviving corporation in the merger) (the "Merger") pursuant to which,
among other things: (a) each share of Class A Common Stock, $.0001 par value, of
FluoroScan issued and outstanding immediately prior to the effective time of the
Merger shall be converted into the right to receive 0.31069 shares of Common
Stock of Hologic, $.01 par value, (the "Exchange Ratio"), subject to a price
collar on the Common Stock of Hologic of $30.17 and $50.29 (the "Exchange
Ratio"); (b) each share of Common Stock issued and outstanding immediately prior
to the effective time of the Merger held in Treasury of the Company, by the Sub,
or by Hologic shall be canceled and retired and no payment shall be made with
respect thereto; and (c) all options, whether vested or unvested, to purchase
FluoroScan Common Stock and all options to purchase Company units then
outstanding shall be assumed by Hologic as provided in the Agreement of Merger.
The Merger is expected to be considered by the stockholders of the Company
at a special meeting of stockholders and to be consummated on or shortly after
the date of such meeting.
You have asked for our opinion, as investment bankers, as to whether the
Exchange Ratio is fair to the holders of FluoroScan Common Stock from a
financial point of view.
Rodman & Renshaw, Inc., as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. We have acted as financial
advisor to the Board of Directors of FluoroScan in connection with the Merger,
have received fees for financial advisory services upon the execution of the
Agreement of Merger and the
B-1
<PAGE>
FluoroScan Imaging Systems, Inc.
July 18, 1996
Page 2
delivery of this opinion and will receive an additional fee contingent upon the
consummation of the Merger.
In arriving at the opinion set forth below, with respect to FluoroScan,
we have, among other things: (a) reviewed, from a financial point of view, the
Agreement of Merger and the annexes thereto; (b) studied the Annual Reports to
Stockholders and Annual Reports on Form 10-KSB for the years ended December 31,
1994 and 1995 and its interim reports on Form 10-QSB and 8-K filed since July
11, 1994; (c) reviewed certain publicly available financial and operating data
relating to FluoroScan's business and prospects, which historical information
and data the management of FluoroScan has represented to us as fairly presenting
the financial condition and operating results of FluoroScan as of the dates
presented and, with respect to the prospects of FluoroScan, as being reasonable
evaluations of FluoroScan's prospects; (d) discussed certain financial
information and the business and prospects of FluoroScan with its senior
management; (e) reviewed the reported historical and recent market prices and
trading volumes of the FluoroScan Common Stock; (f) compared the financial,
operating and stock price performance of FluoroScan with certain other companies
deemed comparable; (g) reviewed the financial terms, to the extent publicly
available, of certain other acquisition transactions deemed comparable; and (h)
made such other analyses and examinations as we deemed necessary or appropriate.
With respect to Hologic, we have, among other things: (a) studied the Annual
Reports to Stockholders and Annual Reports on Form 10-K for the years ended
September 25, 1993 September 24, 1994 and September 30, 1995 and its interim
reports on Form 10-Q and 8-K filed since September 25, 1993; (b) reviewed
certain publicly available financial and operating data relating to Hologic's
business and prospects, which historical information and data the management of
Hologic has represented to us as fairly presenting the financial condition and
results of operations of Hologic as of the dates presented and, with respect to
the prospects of Hologic, as being reasonable evaluations of Hologic's
prospects; (c) discussed certain financial information and the business and
prospects of Hologic with its senior management; (d) reviewed the reported
historical and recent market prices and trading volumes of the Hologic Common
Stock; (e) compared the financial, operating and stock price performance of
Hologic with certain other companies deemed comparable; and (f) made such other
analyses and examinations as we deemed necessary or appropriate. We also have
taken into account our assessment of economic, market and financial conditions
generally and within the industry in which FluoroScan and Hologic are engaged.
In rendering our opinion, we have assumed and relied upon the accuracy
and completeness of all information supplied or otherwise made available to us
by FluoroScan and Hologic or obtained by us from other sources, and we have
relied upon the representations of respective management of FluoroScan and
Hologic that they are unaware of any information or facts that would make the
information provided to us incomplete or misleading. We have not independently
verified such information, undertaken an independent appraisal of the assets or
liabilities (contingent or otherwise) of FluoroScan or Hologic or have been
furnished with any such appraisals. With respect to the publicly available
financial forecasts with regard to each of FluoroScan and Hologic which we have
reviewed, we have relied on the representations of the respective management of
FluoroScan and Hologic that such available forecasts were reasonable and that:
(a) as to the respective forecasts, they are unaware of any facts that would
make such information incomplete, in any material respect, or misleading; and
(b) there have been no material adverse developments in
B-2
<PAGE>
FluoroScan Imaging Systems, Inc.
July 18, 1996
Page 3
the business condition (financial or otherwise) or prospects of FluoroScan or
Hologic, respectively, since each company's most recent fiscal year end. We
also have assumed, on the basis of advice from FluoroScan's independent public
accountants and counsel, that the Merger will be treated as a pooling of
interests in accordance with generally accepted accounting principles and as a
tax free reorganization for Federal income tax purposes.
Our opinion is necessarily based on economic, market and other
conditions as they exist, and the information made available to us, as of the
date hereof. We disclaim any undertaking or obligation to advise any person of
any change in any fact or matter affecting our opinion which may come or be
brought to our attention after the date of this opinion. In the performance of
our financial advisory services, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of FluoroScan
or any of its assets. No other limitations were imposed upon us by FluoroScan
with respect to the investigations to be made or procedures to be followed by us
in rendering our opinion.
The opinion expressed herein does not constitute a recommendation as to
any action the Board of Directors or any stockholder of FluoroScan should take
in connection with the Merger. We have expressed no opinion as to the value of
the securities of Hologic to be issued to holders of FluoroScan Common Stock
upon consummation of the Merger, or the prices at which such securities may
trade at any time. Further, we express no opinion herein as to the structure,
terms or effect of any other aspect of the Merger, including, without
limitation, the tax consequences thereof.
It is understood that this letter is for the information of the Board of
Directors of FluoroScan in connection with its evaluation of the fairness, from
a financial point of view, as of the date hereof, of the Exchange Ratio to the
holders of FluoroScan Common Stock and for inclusion in the Joint Proxy
Statement of FluoroScan and Hologic relating to the Merger. Without limiting
the foregoing, in rendering this opinion, we have not been engaged to act as an
agent or fiduciary for FluoroScan's common stockholders or any other third
party.
Based on and subject to the foregoing, we are of the opinion that the
Exchange Ratio is fair to the holders of Common Stock of FluoroScan from a
financial point of view.
Very truly yours,
RODMAN & RENSHAW, INC.
By: /s/Peter H. Blum
---------------------
Peter H. Blum
Managing Director
B-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Registrant's Certificate of Incorporation eliminates the
personal liability of directors to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty to the extent permitted by the
Delaware General Corporation Law. Article VII of the Registrant's By-Laws
provides that the Registrant shall indemnify its officers and directors to the
extent permitted by the 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 reason to believe his conduct was
unlawful, as determined in accordance with the Delaware General Corporation
Law. Section 145 further provided that indemnification shall be provided if
the party in question is successful on the merits or otherwise. The Registrant
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 Registrant for liabilities arising under the Securities
Act of 1933, as amended. The Registrant also maintains directors and officers
liability insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
2.01 --Agreement and Plan of Merger dated as of July 18, *
1996, between the Registrant, Fenway Acquisition
Corp. and FluoroScan Imaging Systems, Inc.
3.01 --Certificate of Incorporation of the Registrant. 3.01-A
3.02 --By-Laws of the Registrant. 3.02-A
4.01 --Specimen certificate for shares of the Registrant's 4.01-A
Common Stock.
4.02 --Description of capital stock contained in the 4.02-A
Certificate of Incorporation of the Registrant,
filed as Exhibit 3.01.
4.03 --Rights Agreement dated December 22, 1992. 4.03-C
4.04 --Amendment No. 1 to Rights Agreement. 4.04-G
5.01 --Opinion of Brown, Rudnick, Freed & Gesmer.
8.01 --Form of Opinion of Brown, Rudnick, Freed & Gesmer +
with respect to federal income tax matters.
8.02 --Form of Opinion of Katten Muchin & Zavis with +
respect to federal income tax matters.
10.01 --1986 Combination Stock Option Plan, as amended. 10.07-F
10.02 --Amended and Restated 1990 Non-Employee Director 10.08-H
Stock Option Plan.
10.03 --Employee Stock Purchase Plan of the Registrant. 10.09-F
10.04 --1995 Combination Stock Option Plan. 10.10-H
10.05 --Form of Indemnification Agreement for directors and 10.12-A
certain officers of the Registrant.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.06 --Management Agreement between the Registrant and 10.17-A
Vivid Technologies, Inc.
10.07 --License Agreement between the Registrant and Vivid 10.18-A
Technologies, Inc.
**10.08 --Distribution Agreement between the Registrant, Toyo
Medic
Company Limited and Yokogawa Medical Systems, Ltd. 10.19-B
10.09 --Facility lease between the Registrant and Lincoln 10.20-B
Street Trust.
**10.10 --Orion Corporation Soredex Distribution Agreement 10.21-D
for Scanora.
10.11 --Employment Agreement with an officer of the 10.22-E
Registrant.
**10.12 --Serex License Agreement. 10.24-H
10.13 --Form of Amended and Restated Employment Agreement +
with Larry S. Grossman.
10.14 --Form of Amended and Restated Employment Agreement +
with Arlen L. Issette
10.15 --Form of Stockholder Option Agreement among the +
Registrant Larry S. Grossman and Arlen L. Issette.
10.16 --Form of Irrevocable Proxy and Voting Agreement +
between the Registrant and each of Larry S. Grossman
and Arlen L. Issette.
10.17 --First Amendment to facility lease between the +
Registrant and Lincoln Street Trust.
22.01 --Subsidiaries of the Registrant. +
23.1 --Consent of Brown, Rudnick, Freed & Gesmer
(contained in Exhibit 5).
23.2 --Consent of Katten Muchin and Zavis.
23.3 --Consent of Arthur Andersen LLP, independent
accountants of the Registrant.
23.4 --Consent of BDO Seidman, LLP, independent
accountants of FluoroScan Imaging Systems, Inc.
23.5 --Consent of Rodman & Renshaw, Inc.
99 --Form of FluoroScan Imaging Systems, Inc. Proxy Card +
</TABLE>
- --------
* Filed herewith as Appendix A to the Proxy Statement/Prospectus. Pursuant to
Item 601(b)(2) of Regulation S-K, the schedules to the Merger Agreement are
omitted. A list of such schedules appears at the end of the Merger
Agreement. The Registrant hereby undertakes to furnish supplementally a
copy of any omitted schedule to the Commission on request.
** Confidentiality requested as to certain matters.
+ Each of the exhibits was previously filed as an exhibit of the same number
to the Registrant's Registration Statement on Form S-4 (Registration No.
333-08977) and is incorporated herein by reference.
A. Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (File No. 33-33-128) filed on January 24, 1990. The number set
forth in the reference column is the number of the Exhibit in said
Registration Statement.
II-2
<PAGE>
B. Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended September 30, 1990. The number set forth in the
reference column is the number of the Exhibit in said Report.
C. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 30, 1992. The number set forth in the
reference column is the number of the Exhibit in such Report.
D. Incorporated by reference to the Registrant's Annual Quarterly Report on
Form 10-Q for the third quarter of the fiscal year ended September 25,
1993. The number set forth in the reference column is the number of the
Exhibit in such Report.
E. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 25, 1993. The number set forth in the
reference column is the number of the Exhibit in such Report.
F. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 24, 1994. The number set forth is the
reference column is the number of the Exhibit in such Report.
G. Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (File No. 33-65019) filed on December 14, 1995. The number set
forth in the reference column is the number of the Exhibit in such
Registration Statement.
H. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 25, 1995. The number set forth in the
reference column is the number of the Exhibit in such Report.
(b) Financial Statement Schedules
The following financial statement schedule of the Registrant is filed
herewith:
<TABLE>
<C> <S>
Schedule II --Valuation and Qualifying Accounts.
</TABLE>
All other schedules are omitted as the information required is inapplicable
or the information is presented in the financial statements or the related
notes.
(c) The opinion of Rodman & Renshaw, Inc. is included as Appendix B to the
Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described in Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
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 of
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 undertakes that, 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
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by
II-3
<PAGE>
persons who may be deemed to be underwriters in addition to the information
called for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to securityholders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The Registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Items 4, 10(b),
11 or 13 of this Form within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the Registration Statement through the date of
responding to the request.
The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WALTHAM, COMMONWEALTH OF
MASSACHUSETTS ON THE 9TH DAY OF SEPTEMBER, 1996.
Hologic, Inc.
/s/ S. David Ellenbogen
By: __________________________________
S. DAVID ELLENBOGEN CHIEF
EXECUTIVE OFFICER
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.
SIGNATURE TITLE DATE
/s/ S. David Ellenbogen Principal Executive September 9,
- ------------------------------------ Officer and 1996
S. DAVID ELLENBOGEN Director
/s/ Glenn P. Muir Principal Financial September 9,
- ------------------------------------ and Accounting 1996
GLENN P. MUIR Officer
/s/ Jay A. Stein Director September 9,
- ------------------------------------ 1996
JAY A. STEIN
/s/ Irwin Jacobs Director September 9,
- ------------------------------------ 1996
IRWIN JACOBS
Director September 9,
- ------------------------------------ 1996
WILLIAM A. PECK
Director September 9,
- ------------------------------------ 1996
GERALD SEGEL
/s/ Elaine Ullian Director September 9,
- ------------------------------------ 1996
ELAINE ULLIAN
/s/ Larry S. Grossman Director September 9,
- ------------------------------------ 1996
LARRY S. GROSSMAN
II-5
<PAGE>
SCHEDULE II
HOLOGIC, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
OF PERIOD EXPENSES PERIOD
---------- ---------- ---------
<S> <C> <C> <C>
Allowance for Uncollect-
ible Amounts Year End-
ed:
September 25, 1993...... $125 $ 70 $195
September 24, 1994...... 195 655 850
September 30, 1995...... 850 -- 850
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
2.01 --Agreement and Plan of Merger dated as of July 18, *
1996, between the Registrant, Fenway Acquisition
Corp. and FluoroScan Imaging Systems, Inc.
3.01 --Certificate of Incorporation of the Registrant. 3.01-A
3.02 --By-Laws of the Registrant. 3.02-A
4.01 --Specimen certificate for shares of the Registrant's 4.01-A
Common Stock.
4.02 --Description of capital stock contained in the 4.02-A
Certificate of Incorporation of the Registrant,
filed as Exhibit 3.01.
4.03 --Rights Agreement dated December 22, 1992. 4.03-C
4.04 --Amendment No. 1 to Rights Agreement. 4.04-G
5.01 --Opinion of Brown, Rudnick, Freed & Gesmer.
8.01 --Form of Opinion of Brown, Rudnick, Freed & Gesmer +
with respect to federal income tax matters.
8.02 --Form of Opinion of Katten Muchin & Zavis with +
respect to federal income tax matters.
10.01 --1986 Combination Stock Option Plan, as amended. 10.07-F
10.02 --Amended and Restated 1990 Non-Employee Director 10.08-H
Stock Option Plan.
10.03 --Employee Stock Purchase Plan of the Registrant. 10.09-F
10.04 --1995 Combination Stock Option Plan. 10.10-H
10.05 --Form of Indemnification Agreement for directors and 10.12-A
certain officers of the Registrant.
10.06 --Management Agreement between the Registrant and 10.17-A
Vivid Technologies, Inc.
10.07 --License Agreement between the Registrant and Vivid 10.18-A
Technologies, Inc.
**10.08 --Distribution Agreement between the Registrant, Toyo
Medic
Company Limited and Yokogawa Medical Systems, Ltd. 10.19-B
10.09 --Facility lease between the Registrant and Lincoln 10.20-B
Street Trust.
**10.10 --Orion Corporation Soredex Distribution Agreement 10.21-D
for Scanora.
10.11 --Employment Agreement with an officer of the 10.22-E
Registrant.
**10.12 --Serex License Agreement. 10.24-H
10.13 --Form of Amended and Restated Employment Agreement +
with Larry S. Grossman.
10.14 --Form of Amended and Restated Employment Agreement +
with Arlen L. Issette
10.15 --Form of Stockholder Option Agreement among the +
Registrant Larry S. Grossman and Arlen L. Issette.
10.16 --Form of Irrevocable Proxy and Voting Agreement +
between the Registrant and each of Larry S. Grossman
and Arlen L. Issette.
10.17 --First Amendment to facility lease between the +
Registrant and Lincoln Street Trust.
22.01 --Subsidiaries of the Registrant. +
23.1 --Consent of Brown, Rudnick, Freed & Gesmer
(contained in Exhibit 5).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
23.2 --Consent of Katten Muchin and Zavis.
23.3 --Consent of Arthur Andersen LLP, independent
accountants of the Registrant.
23.4 --Consent of BDO Seidman, LLP, independent accountants
of FluoroScan Imaging Systems, Inc.
23.5 --Consent of Rodman & Renshaw, Inc.
99 --Form of FluoroScan Imaging Systems, Inc. Proxy Card +
</TABLE>
- --------
* Filed herewith as Appendix A to the Proxy Statement/Prospectus. Pursuant to
Item 601(b)(2) of Regulation S-K, the schedules to the Merger Agreement are
omitted. A list of such schedules appears at the end of the Merger
Agreement. The Registrant hereby undertakes to furnish supplementally a
copy of any omitted schedule to the Commission on request.
** Confidentiality requested as to certain matters.
+ Each of the exhibits was previously filed as an exhibit of the same number
to the Registrant's Registration Statement on Form S-4 (No. 333-08977) and
is incorporated herein by reference.
A. Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (File No. 33-33-128) filed on January 24, 1990. The number set
forth in the reference column is the number of the Exhibit in said
Registration Statement.
B. Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended September 30, 1990. The number set forth in the
reference column is the number of the Exhibit in said Report.
C. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 30, 1992. The number set forth in the
reference column is the number of the Exhibit in such Report.
D. Incorporated by reference to the Registrant's Annual Quarterly Report on
Form 10-Q for the third quarter of the fiscal year ended September 25,
1993. The number set forth in the reference column is the number of the
Exhibit in such Report.
E. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 25, 1993. The number set forth in the
reference column is the number of the Exhibit in such Report.
F. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 24, 1994. The number set forth is the
reference column is the number of the Exhibit in such Report.
G. Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (File No. 33-65019) filed on December 14, 1995. The number set
forth in the reference column is the number of the Exhibit in such
Registration Statement.
H. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 25, 1995. The number set forth in the
reference column is the number of the Exhibit in such Report.
<PAGE>
EXHIBIT 5.01
September 9, 1996
Hologic, Inc.
590 Lincoln Street
Waltham, MA 02154
RE: Registration Statement on Form S-4 of Hologic, Inc.
--------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Hologic, Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission of a Registration Statement on Form S-4 (the
"Registration Statement") pursuant to which the Company is registering under the
Securities Act of 1933, as amended (the "Act"), a total of 1,454,901 shares of
common stock, $.01 par value per share (the "Common Stock"). Pursuant to the
Registration Statement and an Agreement and Plan of Merger dated July 18, 1996
(the "Merger Agreement") by and among the Company, FluoroScan Imaging Systems,
Inc. ("FluoroScan") and Fenway Acquisition Corp., in the form filed as Exhibit
2.01 to the Registration Statement, the Company proposes to issue to the holders
of FluoroScan common stock, $.0001 par value per share, up to 1,454,901 shares
of Common Stock (the "Shares"). This opinion is being rendered in connection
with the filing of the Registration Statement. Unless otherwise indicated,
capitalized terms used herein shall have the meanings ascribed thereto in the
Merger Agreement.
For purposes of this opinion, we have assumed, without any investigation,
(i) the legal capacity of each natural person, (ii) the full power and authority
of each entity and person other than the Company and Fenway Acquisition Corp. to
execute, deliver and perform each document heretofore executed and delivered or
hereafter to be executed and delivered and to do each other act heretofore done
or hereafter to be done by such entity or person, (iii) the due authorization by
each entity or person other than the Company and Fenway Acquisition Corp. of
each document heretofore executed and delivered or hereafter to be executed and
delivered and to do each other act heretofore done or to be done by such entity
or person, (iv) the due execution and delivery by each entity or person other
than the Company and Fenway Acquisition Corp. of each document heretofore
executed and delivered or hereafter to be executed and delivered by such entity
or person, (v) the legality, validity, binding effect and enforceability as to
each entity or person other than the Company and Fenway Acquisition Corp. of
each document heretofore executed and delivered or hereafter to be executed and
delivered and of each other act heretofore done or
<PAGE>
hereafter to be done by such entity or person, (vi) the genuineness of each
signature on, and the completeness of each document submitted to us as an
original, (vii) the conformity to the original of each document submitted to us
as a copy, (viii) the authenticity of the original of each document submitted to
us as a copy, (ix) the completeness, accuracy and property indexing of all
governmental and judicial records searched and (x) no modification of any
provision of any document, no waiver of any right or remedy and no exercise of
any right or remedy other than in a commercially reasonable and conscionable
manner and in good faith.
In connection with this opinion, we have examined the following
(collectively, the "Documents"):
(i) the Certificate of Incorporation of the Company incorporated by
reference as Exhibit 3.01 to the Registration Statement;
(ii) the By-laws of the Company incorporated by reference as Exhibit 3.02
to the Registration Statement;
(iii) the corporate minute books or other records of the Company;
(iv) a specimen certificate for the Common Stock incorporated by reference
as Exhibit 4.01 to the Registration Statement; and
(v) the Merger Agreement.
The opinions expressed herein are based solely upon (i) our review of the
Documents, (ii) discussions with S. David Ellenbogen, the Chairman of Board and
Chief Executive Officer of the Company and Glenn P. Muir, the Company's Vice
President of Finance and Treasurer; (iii) the representations and warranties of
the Company, Fenway Acquisition Corp. and FluoroScan contained in the Merger
Agreement and the schedules and exhibits thereto, (iv) discussions with those of
our attorneys who have devoted substantive attention to the matters contained
herein, and (v) such review of published sources of law as we have deemed
necessary.
Our opinions contained herein are limited to the laws of The Commonwealth
of Massachusetts, the general corporate laws of the State of Delaware and the
federal law of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
The Shares to be issued by the Company under the circumstances contemplated
in the Registration Statement are duly authorized and, when delivered pursuant
to the Merger Agreement, will be validly issued, fully paid and nonassessable.
<PAGE>
We understand that this opinion is to be used in connection with the
Registration Statement. We consent to the filing of this opinion as an Exhibit
to said Registration Statement and to the reference to our firm wherever it
appears in the Registration Statement, including the prospectuses constituting a
part thereof and any amendments thereto. This opinion may be used in connection
with the offering of the Shares only while the Registration Statement, as it may
be amended from time to time, remains in effect.
Very truly yours,
BROWN, RUDNICK, FREED & GESMER
By: BROWN, RUDNICK, FREED & GESMER, P.C.
By: /s/ Philip J. Flink
-------------------
Philip J. Flink, A Member
Duly Authorized
<PAGE>
[KATTEN MUCHIN & ZAVIS]
September 6, 1996
Hologic, Inc.
590 Lincoln Street
Waltham, Massachusetts 02154
Ladies and Gentlemen:
We hereby consent to the reference to our name in the Registration Statement
under the caption "Legal Matters".
Very truly yours,
/s/ Katten Muchin & Zavis
---------------------------------
Katten Muchin & Zavis
<PAGE>
EXHIBIT 23.3
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
September 9, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Fluoroscan Imaging Systems, Inc.
Northbrook, Illinois
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 23, 1996, relating to the
consolidated financial statements of Fluoroscan Imaging Systems, Inc., which
is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Chicago, Illinois
September 9, 1996
<PAGE>
EXHIBIT 23.5
[LOGO]
September 6, 1996
FluoroScan Imaging Systems, Inc.
650-B Anthony Trail
Northbrook, IL 60062
Attention: Larry Grossman
Gentlemen:
Rodman & Renshaw, Inc. hereby consents to the inclusion of and references to
its fairness opinion dated July 18, 1996, in its entirety in the Proxy
Statement/Prospectus included in the Registration Statement on Form S-4 filed
by Hologic, Inc. and distributed to FluoroScan Imaging Systems, Inc.'s
shareholders in connection with the Agreement of Merger between FluoroScan
Imaging Systems, Inc. and Hologic, Inc.
Very truly yours,
Rodman & Renshaw, Inc.
/s/ Peter H. Blum
By: _________________________________
Peter H. Blum
Managing Director
