Form 424 (b) (3)
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DATED SEPTEMBER 12, 2007

Filed pursuant to Rule 424(b)(3)
File No. 333-144238

 

LOGO   LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

The boards of directors of Hologic, Inc., or Hologic, and Cytyc Corporation, or Cytyc, have approved a business combination of the two companies pursuant to the terms of an Agreement and Plan of Merger dated as of May 20, 2007. Pursuant to the terms of the merger agreement, Cytyc will be merged into a wholly owned subsidiary of Hologic. Following the completion of the merger, Cytyc stockholders will own approximately 55% of the outstanding common stock of the combined company and Hologic stockholders will own approximately 45% of the outstanding common stock of the combined company.

The combined company will be named Hologic, Inc., and the shares of the combined company will be traded on the Nasdaq Global Select Market, under the symbol “HOLX.”

Under the terms of the merger agreement, Cytyc’s stockholders will receive 0.52 of a share of Hologic common stock and $16.50 in cash for each share of Cytyc common stock. Cytyc stockholders will receive cash for any fractional shares which they would otherwise receive in the merger. Hologic stockholders will continue to own their existing shares after the merger. Hologic common stock is traded on the Nasdaq Global Select Market under the symbol “HOLX.” On September 11, 2007, the last practicable day before the mailing of this joint proxy statement/prospectus, the closing price per share of Hologic common stock as reported by the Nasdaq Global Select Market was $53.74.

YOUR VOTE IS IMPORTANT. The merger cannot be completed unless, among other things, Cytyc stockholders adopt the merger agreement, and Hologic stockholders approve an amendment to Hologic’s certificate of incorporation, which we refer to as the Hologic charter, and approve the issuance of Hologic common stock to Cytyc stockholders in the merger.

The Hologic board of directors unanimously recommends that Hologic stockholders vote “FOR” the amendment to the Hologic charter to increase the number of authorized shares of Hologic common stock and “FOR” the issuance of Hologic common stock to Cytyc stockholders in the merger. The Cytyc board of directors unanimously recommends that Cytyc stockholders vote “FOR” the adoption of the merger agreement and the transactions contemplated thereby, including the merger.

Hologic and Cytyc will each hold a special meeting of their respective stockholders to vote on these proposals. Whether or not you plan to attend your company’s special meeting, please take the time to vote by completing and mailing the enclosed proxy card or submitting your proxy by telephone or through the Internet using the procedures in the proxy voting instructions included with your proxy card. Even if you return the proxy, you may attend your company’s special meeting and vote your shares in person.

This joint proxy statement/prospectus describes the proposed merger and related transactions in more detail. Hologic and Cytyc encourage you to read the entire joint proxy statement/prospectus carefully, including the merger agreement, which is attached as Annex A, and the section entitled “ Risk Factors” beginning on page 26.

We strongly support the combination of our companies and join with our respective boards of directors in recommending that you vote in favor of the proposals presented in this joint proxy statement/prospectus.

 

Sincerely,    Sincerely,

LOGO

  

LOGO

John W. Cumming

Chairman and Chief Executive Officer

HOLOGIC, INC.

  

Patrick J. Sullivan

Chairman, Chief Executive Officer and President

CYTYC CORPORATION

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated September 12, 2007 and, together with the accompanying proxy card, is first being mailed or otherwise distributed to stockholders of Hologic and Cytyc on or about September 17, 2007.


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THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES

ADDITIONAL INFORMATION

Hologic

This joint proxy statement/prospectus incorporates by reference important business and financial information about Hologic from other documents filed with the Securities and Exchange Commission, which is referred to as the SEC, that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. For a list of the documents incorporated by reference into this joint proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 197. You can obtain the documents that are incorporated by reference into this joint proxy statement/prospectus, without charge, from the Investor Relations section of Hologic’s website at www.hologic.com or by requesting them in writing or by telephone as set forth below:

 

By Mail: Hologic, Inc.
     35 Crosby Drive
     Bedford, MA 01730

 

By Telephone: (781) 999-7300

If you would like to request any documents, please do so by October 11, 2007 in order to receive them before the Hologic special meeting.

Cytyc

Cytyc is subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act, and, in accordance therewith, is obligated to file reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. The information filed by Cytyc with the SEC may be inspected at the SEC’s public reference library at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such information may be obtained by mail, upon payment of the SEC’s customary charges, by writing to the SEC’s principal office at 100 F Street, N.E., Washington D.C. 20549. The SEC also maintains a website at www.sec.gov that contains the information that Cytyc has filed with the SEC via the EDGAR system. Documents filed with the SEC by Cytyc also are available free of charge on the investor relations portion of the Cytyc website at www.cytyc.com. At the present time, Cytyc is not eligible to incorporate by reference the information filed with the SEC into this joint proxy statement/prospectus and accordingly has included the required business and financial information in this joint proxy statement/prospectus. The business and financial information about Cytyc is attached hereto as Annex B.

Use of Non-GAAP Financial Measures

This joint proxy statement/prospectus includes non-GAAP financial measures, such as adjusted earnings per share, or adjusted EPS, and EBITDA. Adjusted EPS excludes the write-off and amortization of acquisition-related intangible assets, and tax provisions/benefits related thereto. EBITDA is defined as net earnings (loss) before interest, taxes, depreciation and amortization expense. Hologic and Cytyc believe that the use of these non-GAAP measures helps investors to gain a better understanding of our respective core operating results and future prospects, consistent with how management measures and forecasts our respective performance, especially when comparing such results to previous periods or forecasts. When analyzing Hologic’s operating performance, investors should not consider these non-GAAP financial measures as a substitute for net income prepared in accordance with U.S. generally accepted accounting principles, referred to as U.S. GAAP or GAAP.


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VOTING ELECTRONICALLY, BY TELEPHONE, BY MAIL OR IN PERSON

Hologic stockholders of record as of the close of business on August 22, 2007 may submit their proxies:

 

   

through the Internet, by visiting the website established for that purpose at www.voteproxy.com and following the instructions set forth therein;

 

   

by telephone, by calling toll-free 1-800-PROXIES (1-800-776-9437) in the United States, Canada or Puerto Rico on a touch-tone phone and following the recorded instructions; or

 

   

by mail, by marking, signing, and dating your proxy card and returning it in the postage-paid envelope provided or pursuant to the instructions set out in the proxy card.

In addition, a Hologic stockholder may attend the Hologic special meeting in person and vote in person. If your shares are held in “street name,” you must request a legal proxy from your nominee as proof of ownership in order to vote in person at the special meeting.

Cytyc stockholders of record as of the close of business on August 22, 2007 may submit their proxies:

 

   

through the Internet, by visiting the website established for that purpose at www.investorvote.com and following the instructions set forth therein;

 

   

by telephone, by calling toll-free 1-800-652-VOTE (1-800-652-8683) in the United States, Canada or Puerto Rico on a touch-tone phone and following the recorded instructions; or

 

   

by mail, by marking, signing, and dating your proxy card and returning it in the postage-paid envelope provided or pursuant to the instructions set out in the proxy card.

In addition, a Cytyc stockholder may attend the Cytyc special meeting and vote in person. If your shares are held in “street name,” you must request a legal proxy from your nominee as proof of ownership in order to vote in person at the special meeting.

If you hold your shares in “street name”, please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On October 18, 2007

Dear Stockholder:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Hologic, Inc. will be held on October 18, 2007 at 9:00 a.m., local time, at Hologic’s principal executive offices located at 35 Crosby Drive, Bedford, Massachusetts 01730 (the “Hologic special meeting”).

The purpose of the Hologic special meeting is to consider and to vote on the following proposals:

 

   

to approve an amendment to Hologic’s Certificate of Incorporation, as amended, which is referred to as the Hologic charter, effective immediately prior to the effective time of the merger, to increase the authorized number of shares of Hologic common stock from 90,000,000 to 300,000,000;

 

   

to approve the issuance of shares of Hologic common stock to stockholders of Cytyc Corporation in connection with the merger contemplated by the Agreement and Plan of Merger dated as of May 20, 2007, among Hologic, Cytyc and Nor’easter Corp., a wholly owned subsidiary of Hologic formed for the purpose of the merger;

 

   

to approve the Hologic, Inc. Senior Executive Short-Term Incentive Plan;

 

   

to approve an amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan, which amendment will become effective if the merger is completed; and

 

   

if submitted to a vote of Hologic stockholders, to approve an adjournment of the special meeting, including, if necessary, to solicit additional proxies in favor of the foregoing proposals if there are not sufficient votes for those proposals.

The Hologic board of directors has unanimously determined that the merger agreement, the merger and the other transactions contemplated therein, including the amendment to the Hologic charter and the issuance of Hologic common stock in the merger, are advisable and in the best interests of Hologic and its stockholders. The Hologic board of directors recommends that Hologic stockholders vote “FOR” the amendment to the Hologic charter, “FOR” the issuance of Hologic common stock in the merger, “FOR” the approval of the Hologic, Inc. Senior Executive Short-Term Incentive Plan, “FOR” the approval of an amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan and “FOR” the adjournment of the special meeting, including, if necessary, to solicit additional proxies in favor of any of the proposals to be acted upon at the Hologic special meeting.

Hologic and Cytyc cannot complete the merger unless:

 

   

the proposed amendment to the Hologic charter is approved by the affirmative vote of a majority of the outstanding shares of Hologic common stock entitled to vote on the proposal; and

 

   

the issuance of shares of Hologic common stock to Cytyc stockholders in the merger is approved by the affirmative vote of a majority of the votes cast in person or by proxy on the proposal.

Your failure to vote will have the same effect as a vote against the approval of the Hologic charter amendment.

The close of business on August 22, 2007 has been fixed as the record date, which is referred to as the Hologic record date, for the determination of Hologic stockholders who are entitled to notice of, and to vote at, the Hologic special meeting or any adjournments or postponements of the Hologic special meeting. Only holders of Hologic common stock of record at the close of business on August 22, 2007 are entitled to notice of, and to vote at, the Hologic special meeting or any adjournments or postponements of the Hologic special meeting. A


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complete list of the holders of Hologic common stock entitled to vote at the Hologic special meeting will be available for examination by any Hologic stockholder, for any purpose germane to the Hologic special meeting, at Hologic’s principal executive offices at 35 Crosby Drive, Bedford, Massachusetts 01730, for a period of ten days before the Hologic special meeting, between the hours of 9:00 a.m. and 4:00 p.m., local time, and at the Hologic special meeting during the entire time of the meeting.

We direct your attention to the joint proxy statement/prospectus accompanying this notice for a more complete statement regarding the matters proposed to be acted upon at the Hologic special meeting. We encourage you to read the entire joint proxy statement/prospectus carefully, including the merger agreement, which is attached as Annex A to the joint proxy statement/prospectus, and the section entitled “Risk Factors” beginning on page 26.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE HOLOGIC SPECIAL MEETING, PLEASE VOTE AS SOON AS POSSIBLE BY MAIL, BY TELEPHONE OR THROUGH THE INTERNET. INSTRUCTIONS ON THESE DIFFERENT WAYS TO VOTE YOUR PROXY ARE FOUND ON THE ENCLOSED PROXY CARD. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE HOLOGIC SPECIAL MEETING BY FOLLOWING THE PROCEDURES SET FORTH IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. REMEMBER, YOUR VOTE IS IMPORTANT, SO PLEASE VOTE PROMPTLY!

 

By Order of the Board of Directors,

LOGO

John W. Cumming

Chairman of the Board and Chief Executive Officer

September 12, 2007


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On October 18, 2007

To the Stockholders of Cytyc Corporation:

Cytyc Corporation (“Cytyc”) is pleased to invite you to attend a special meeting of the stockholders of Cytyc which will be held on October 18, 2007 at 9:00 a.m., local time, at The Hilton Boston Logan Airport, One Hotel Drive, Boston, Massachusetts 02128 (the “Cytyc special meeting”).

The purpose of the Cytyc special meeting is to consider and to vote on the following proposals:

 

   

to adopt the Agreement and Plan of Merger, dated as of May 20, 2007, among Cytyc, Hologic, Inc. (“Hologic”) and Nor’easter Corp., a wholly owned subsidiary of Hologic formed for the purpose of the merger (“MergerSub”), a copy of which is attached as Annex A to the joint proxy statement/prospectus, and the transactions contemplated thereby, including the merger, pursuant to which Cytyc will merge with and into MergerSub, with MergerSub continuing as the surviving corporation under the name “Cytyc Corporation” and as a wholly owned subsidiary of Hologic; and

 

   

if submitted to a vote of Cytyc stockholders, to approve an adjournment of the Cytyc special meeting, including, if necessary, to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are not sufficient votes for that proposal at the time of the meeting.

The Cytyc board of directors has unanimously determined that the merger agreement and the transactions contemplated thereby are advisable and fair to and in the best interests of Cytyc and its stockholders, unanimously authorized, adopted and approved the merger agreement and the transactions contemplated thereby, including the merger, and recommends that Cytyc stockholders vote “FOR” the adoption of the merger agreement and the transactions contemplated thereby, including the merger, and “FOR” the adjournment of the Cytyc special meeting, including, if necessary, to solicit additional proxies in favor of the adoption of the merger agreement.

Hologic and Cytyc cannot complete the merger unless the proposal to adopt the merger agreement is approved by the affirmative vote of a majority of the outstanding shares of Cytyc common stock entitled to vote at the Cytyc special meeting.

Your failure to vote will have the same effect as a vote against the adoption of the merger agreement. Therefore, your vote is very important.

The close of business on August 22, 2007 has been fixed as the record date, which is referred to as the Cytyc record date, for the determination of Cytyc stockholders entitled to notice of, and to vote at, the Cytyc special meeting or any adjournments or postponements of the Cytyc special meeting. Only holders of record of Cytyc common stock at the close of business on the Cytyc record date are entitled to notice of, and to vote at, the Cytyc special meeting. A complete list of stockholders entitled to vote at the Cytyc special meeting will be available for examination by any Cytyc stockholder, during normal business hours, at Cytyc’s headquarters at 250 Campus Drive, Marlborough, Massachusetts 01752 for purposes pertaining to the Cytyc special meeting for a period of ten days before the Cytyc special meeting, and at the Cytyc special meeting during the entire time of the meeting.


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We direct your attention to the joint proxy statement/prospectus accompanying this notice for more detailed information regarding the matters proposed to be acted upon at the Cytyc special meeting. You are encouraged to read the entire joint proxy statement/prospectus carefully, including the merger agreement, which is attached as Annex A to the joint proxy statement/prospectus, and the section entitled “Risk Factors” beginning on page 26 of the joint proxy statement/prospectus.

Holders of Cytyc common stock who do not vote in favor of adopting the merger agreement and who otherwise comply with the requirements of Delaware law will be entitled to appraisal rights. A summary of the applicable Delaware law provision, including the requirements a Cytyc stockholder must follow in order to exercise his or her appraisal rights, is contained in the accompanying joint proxy statement/prospectus.

SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU PLAN TO ATTEND THE CYTYC SPECIAL MEETING, PLEASE VOTE AS SOON AS POSSIBLE BY: (1) ACCESSING THE INTERNET WEBSITE SPECIFIED ON YOUR PROXY CARD; (2) CALLING THE TOLL-FREE NUMBER SPECIFIED ON YOUR PROXY CARD; OR (3) SIGNING, DATING AND MAILING THE ENCLOSED PROXY CARD. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE CYTYC SPECIAL MEETING BY FOLLOWING THE PROCEDURES SET FORTH IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. REMEMBER, YOUR VOTE IS IMPORTANT, SO PLEASE ACT PROMPTLY.

 

By Order of the Board of Directors,

LOGO

Patrick J. Sullivan

Chairman, Chief Executive Officer and President

September 12, 2007


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     Page

QUESTIONS AND ANSWERS ABOUT THE MERGER

   1

SUMMARY

   7

The Companies

   7

The Merger

   9

Selected Historical Consolidated Financial Data of Hologic

   18

Selected Historical Consolidated Financial Data of Cytyc

   20

Summary Unaudited Pro Forma Financial Data

   22

Equivalent and Comparative Per Share Information

   23

Comparative Per Share Market Price and Dividend Information

   24

RISK FACTORS

   26

Risks Related to the Merger

   26

Risks Related to Indebtedness of the Combined Company

   30

Risks Related to Hologic, Cytyc and Combined Company

   32

Risks Related to Hologic Common Stock

   46

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

   47

THE MERGER

   48

Structure of the Merger

   48

Merger Consideration

   48

Background of the Merger

   48

Hologic Reasons for the Merger

   55

Recommendation of the Hologic Board of Directors

   59

Financing of the Merger

   59

Opinions of Financial Advisors to the Hologic Board of Directors

   62

Interests of Hologic Executive Officers and Directors in the Merger

   75

Cytyc Reasons for the Merger

   80

Recommendations of the Cytyc Board of Directors

   84

Opinions of Financial Advisors to the Cytyc Board of Directors

   84

Interests of Cytyc Executive Officers and Directors in the Merger

   95

Accounting Treatment

   105

Board of Directors and Management of Hologic Following the Merger; Headquarters

   105

Federal Securities Laws Consequences; Stock Transfer Restriction Agreements

   106

Appraisal Rights

   107

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

   111

REGULATORY AND OTHER APPROVALS REQUIRED FOR THE MERGER

   114

THE COMPANIES

   115

Hologic

   115

Nor’easter Corp.

   115

Cytyc

   116

THE MERGER AGREEMENT

   117

Explanatory Note Regarding Summary of Merger Agreement and Representations and Warranties in the Merger Agreement

   117

Structure of the Merger

   117

Merger Consideration

   117

Exchange of Shares

   118

Fractional Shares

   118

Cytyc Stock Options, Restricted Stock Units, Performance Shares, Deferred Shares; Employee Stock Purchase Plan

   118

Representations and Warranties

   120

Certain Covenants

   122

Corporate Governance and Other Matters.

   127

 

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Conditions to Completion of the Merger

   129

Termination

   130

Termination Fees

   132

Other Expenses

   134

Amendments; Waivers

   134

THE HOLOGIC SPECIAL MEETING

   135

Date, Time and Place

   135

Purpose of the Hologic Special Meeting

   135

Board Recommendations

   135

Hologic Record Date; Shares Entitled to Vote

   136

Quorum Requirement

   136

Stock Ownership of Hologic Executive Officers and Directors

   136

Votes Required to Approve Hologic Proposals

   136

Voting Procedures—Stockholders of Record and Beneficial Owners

   137

Voting of Proxies

   138

Revocation of Proxies

   139

Solicitation of Proxies

   139

THE CYTYC SPECIAL MEETING

   140

Date, Time and Place

   140

Purpose of the Cytyc Special Meeting

   140

Board Recommendations

   140

Cytyc Record Date; Shares Entitled to Vote

   140

Stock Ownership of Directors and Executive Officers

   140

Quorum Requirement

   140

Votes Required to Approve Cytyc Proposals

   141

Voting of Proxies

   141

Revocation of Proxies

   142

Solicitation of Proxies

   142

Householding

   143

PROPOSAL TO ADJOURN CYTYC SPECIAL MEETING

   143

HOLOGIC CHARTER AMENDMENT

   144

Increase of Authorized Common Stock

   144

APPROVAL OF THE HOLOGIC, INC. SENIOR EXECUTIVE SHORT TERM INCENTIVE PLAN

   144

Summary of the STIP

   145

AMENDMENT TO HOLOGIC’S SECOND AMENDED AND RESTATED 1999 EQUITY INCENTIVE PLAN

   146

Description of the Proposed Amendment

   146

Description of the 1999 Plan

   147

United States Federal Income Tax Consequences

   151

Equity Compensation Plan Information

   154

PROPOSAL TO ADJOURN HOLOGIC SPECIAL MEETING

   156

HOLOGIC BYLAWS AMENDMENT

   156

Board Composition

   156

Board Committees

   157

Indemnification

   157

Chief Executive Officer

   157

Chairman Emeritus

   157

DESCRIPTION OF HOLOGIC CAPITAL STOCK

   158

Authorized Capital Stock

   158

Hologic Common Stock

   158

Transfer Agent and Registrar

   158

Stock Exchange Listing; Delisting and Deregistration of Cytyc Common Stock

   158

COMPARISON OF STOCKHOLDER RIGHTS

   159

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

   175

LEGAL MATTERS

   193

 

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     Page

EXPERTS

   194

FUTURE STOCKHOLDER PROPOSALS

   195

Hologic

   195

Cytyc

   196

WHERE YOU CAN FIND MORE INFORMATION

   197

 

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LIST OF ANNEXES

 

Annex A Agreement and Plan of Merger

 

Annex B Information about Cytyc, Cytyc Financial Statements and Adeza Financial Statements

 

Annex C Opinion of Goldman, Sachs & Co.

 

Annex D Opinion of Jefferies & Company, Inc.

 

Annex E Opinion of Morgan Stanley & Co. Incorporated

 

Annex F Opinion of J.P. Morgan Securities Inc.

 

Annex G Section 262 of the General Corporation Law of the State of Delaware

 

Annex H Amendment to Certificate of Incorporation of Hologic, Inc.

 

Annex I Second Amended and Restated Bylaws of Hologic, Inc.

 

Annex J Hologic, Inc. Senior Executive Short-Term Incentive Plan

 

Annex K Amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

The following are some questions that you, as a stockholder of Hologic or Cytyc, may have regarding the merger and the other matters being considered at the stockholders’ meetings and the answers to those questions. Hologic and Cytyc urge you to read carefully the entire joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger and the other matters being considered at the stockholders’ meetings. Additional important information is also contained in the annexes to and the documents incorporated by reference into this joint proxy statement/prospectus.

 

Q: Why am I receiving this joint proxy statement/prospectus?

 

A: Hologic and Cytyc are proposing to combine the two companies in a merger transaction pursuant to the terms of a merger agreement that is described in this joint proxy statement/prospectus. In the merger, Cytyc will be merged with and into a wholly owned subsidiary of Hologic that was formed for the purpose of the merger, with the Hologic subsidiary surviving the merger and remaining a wholly owned subsidiary of Hologic under the name “Cytyc Corporation.” A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.

 

     In order to complete the merger, Hologic stockholders must approve an amendment to Hologic’s charter to increase the number of authorized shares of Hologic common stock and approve the issuance of shares of Hologic common stock in connection with the merger, and Cytyc stockholders must adopt the merger agreement and the transactions contemplated thereby, including the merger. In addition, all other conditions to the merger must be satisfied or waived.

 

     Neither the amendment to the Hologic charter nor the issuance of Hologic common stock in connection with the merger will take place unless both of these proposals are approved by Hologic stockholders and the merger is completed. Hologic will hold a special meeting of its stockholders, referred to as the Hologic special meeting, to obtain the required approvals of Hologic stockholders, and Cytyc will hold a special meeting of its stockholders, referred to as the Cytyc special meeting, to obtain the required approval of Cytyc stockholders.

 

Q: What will I receive in the merger?

 

A: Hologic stockholders. Each share of Hologic common stock held by Hologic stockholders immediately before the merger will continue to represent one share of Hologic common stock after the effective time of the merger. In other words, Hologic stockholders will receive no consideration in the merger and the merger will not change the number of shares a Hologic stockholder currently owns.

 

     Cytyc stockholders. For each share of Cytyc common stock held immediately before the effective time of the merger, Cytyc stockholders will have the right to receive 0.52 of a share of Hologic common stock and $16.50 in cash without interest. Cytyc stockholders will also receive cash for any fractional shares of Hologic common stock that they would otherwise receive in the merger. The amount of cash for fractional shares will be calculated by multiplying the fraction of a share of Hologic common stock to which the Cytyc stockholder would be entitled to receive in the merger by the closing sale price of a share of Hologic common stock on the closing date of the merger.

 

     Hologic and Cytyc expect that, upon completion of the merger, assuming conversion of all of Cytyc’s outstanding 2.25% Senior Convertible Notes due 2024, approximately 55% of the outstanding common stock of Hologic will be held by former Cytyc stockholders, and approximately 45% of the outstanding common stock of Hologic will be held by current Hologic stockholders.

 

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Q: How will Hologic pay for the cash portion of the merger consideration?

 

A: Hologic has received a firm financing commitment from Goldman Sachs Credit Partners L.P., Bank of America, N.A., Banc of America Securities LLC, Banc of America Bridge LLC, Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A., and J.P. Morgan Securities Inc., collectively referred to as the arrangers, in which the arrangers committed to provide, in the aggregate, financing of up to approximately $2.55 billion to pay for the cash portion of the merger consideration, for repayment of existing debt of Hologic and Cytyc, for expenses relating to the merger and for working capital following the completion of the merger. For a more detailed description of the terms of the financing and the commitment letter, see “The Merger—Financing of the Merger” beginning on page 59, and for information about certain risks related to the financing, see “Risk Factors—Risks Related to Indebtedness of the Combined Company” beginning on page 30.

 

Q: Is the merger expected to be taxable to stockholders?

 

A: Hologic and Cytyc intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code. If you are a Cytyc stockholder, you generally will recognize income or gain for U.S. federal income tax purposes equal to the lesser of (i) the amount of cash (excluding cash that you receive in lieu of fractional shares of Hologic common stock) that you receive and (ii) the amount of gain that you realize, which generally is equal to the sum of (a) the amount of cash that you receive plus (b) the fair market value of any Hologic common stock that you receive, over your tax basis in the shares of Cytyc common stock that you surrender pursuant to the merger. In addition, if you receive cash in lieu of a fractional share of Hologic common stock, you will recognize gain or loss based on the difference between the cash you receive for such fractional share and your tax basis allocable to the fractional share.

 

     You should read “Material United States Federal Income Tax Consequences of the Merger” beginning on page 111 for a more complete discussion of the United States federal income tax consequences of the merger.

 

     If you are a Hologic stockholder, you will simply retain your shares of Hologic common stock, and the merger therefore will not be taxable to you.

 

     Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. We recommend that you consult your tax advisor to determine the tax consequences of the merger to you.

 

Q: When and where are the Hologic and Cytyc special meetings?

 

A: Hologic special meeting. The Hologic special meeting will be held on October 18, 2007 at 9:00 a.m., local time, at Hologic’s principal executive offices located at 35 Crosby Drive, Bedford, Massachusetts 01730, to consider and vote on the proposals related to the merger and certain other proposals.

 

     Cytyc special meeting. The Cytyc special meeting will be held on October 18, 2007 at 9:00 a.m., local time, at The Hilton Boston Logan Airport, One Hotel Drive, Boston, Massachusetts 02128 to consider and vote on the proposals related to the merger.

 

Q: What are Hologic stockholders being asked to vote on?

 

A: Hologic stockholders are being asked to vote (i) to approve an amendment to the Hologic charter to increase the number of authorized shares of Hologic common stock, (ii) to approve the issuance of shares of Hologic common stock to Cytyc stockholders in connection with the merger, (iii) to approve the Hologic, Inc. Senior Executive Short-Term Incentive Plan, (iv) to approve an amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan, and (v) if submitted to a vote of Hologic stockholders, to approve the adjournment of the Hologic special meeting, including, if necessary, to solicit additional proxies in favor of any of the foregoing proposals.

 

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Q: Why are Hologic stockholders being asked to approve the Hologic, Inc. Senior Executive Short-Term Incentive Plan?

 

A: Hologic is submitting the Hologic, Inc. Senior Executive Short-Term Incentive Plan for stockholder approval as required by Section 162(m) of the Code. If the plan is approved by stockholders and the terms of the plan are satisfied, the payment of bonuses to certain executive officers of Hologic will be fully deductible by Hologic as qualified performance-based compensation under Section 162(m) of the Code.

 

Q: Why are Hologic stockholders being asked to approve an amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan?

 

A: Hologic is submitting the amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan for stockholder approval for the purpose of increasing the number of shares of common stock available for issuance under that plan by 4,000,000 shares effective upon completion of the merger. Following completion of the merger, the combined company will be a much larger company with significantly more employees. The Hologic board of directors believes the combined company will need a significant number of shares available to provide equity-based incentive compensation to the directors, officers and other employees of the combined company following the merger.

 

Q: What are Cytyc stockholders being asked to vote on?

 

A: Cytyc stockholders are being asked to vote (i) to adopt the merger agreement and the transactions contemplated thereby, including the merger, and (ii) if submitted to a vote of the Cytyc stockholders, to approve the adjournment of the Cytyc special meeting, including, if necessary, to solicit additional proxies in favor of the proposal to adopt the merger agreement.

 

Q: What vote by Hologic stockholders is required to approve the proposals to be submitted to Hologic stockholders at the Hologic special meeting?

 

A: The affirmative vote of a majority of the outstanding shares of Hologic common stock entitled to vote at the Hologic special meeting is required for approval of the amendment to Hologic’s charter to increase the number of authorized shares of Hologic common stock from 90,000,000 to 300,000,000.

 

     The affirmative vote of a majority of the votes cast in person or by proxy at the Hologic special meeting is required to approve the proposals relating to the issuance of Hologic common stock to Cytyc stockholders in the merger, the approval of the Hologic, Inc. Senior Executive Short-Term Incentive Plan and the approval of the amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan.

 

     The affirmative vote of a majority of votes cast in person or by proxy, whether or not a quorum is present at the Hologic special meeting, is required for stockholders to approve the proposal to adjourn the Hologic special meeting.

 

Q: What vote by Cytyc stockholders is required to approve the proposals to be submitted to Cytyc stockholders at the Cytyc special meeting?

 

A: The affirmative vote of a majority of the outstanding shares of Cytyc common stock entitled to vote at the Cytyc special meeting is required to adopt the merger agreement and the transactions contemplated thereby, including the merger.

 

     The affirmative vote of a majority of votes cast in person or by proxy, whether or not a quorum is present at the Cytyc special meeting, is required for stockholders to approve the proposal to adjourn the Cytyc special meeting.

 

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Q: Who can vote at the Hologic special meeting?

 

A: Hologic stockholders can vote at the Hologic special meeting if they owned shares of Hologic common stock at the close of business on August 22, 2007, the record date for the Hologic special meeting. As of the close of business on that day, 53,947,712 shares of Hologic common stock were outstanding.

 

Q: Who can vote at the Cytyc special meeting?

 

A: Cytyc stockholders can vote at the Cytyc special meeting if they owned shares of Cytyc common stock at the close of business on August 22, 2007, the record date for the Cytyc special meeting. As of the close of business on that day, 117,627,349 shares of Cytyc common stock were outstanding.

 

Q: Why is my vote important?

 

A: In order to complete the merger, Hologic stockholders must approve the amendment to the Hologic charter to increase the number of authorized shares of Hologic common stock and the issuance of Hologic common stock to Cytyc stockholders in the merger, and Cytyc stockholders must adopt the merger agreement and the transactions contemplated thereby, including the merger.

Hologic stockholders.

 

   

If you abstain from voting or do not vote (either in person or by proxy), or fail to direct your broker how to vote, it will have the same effect as a vote AGAINST the proposal to approve the amendment to the Hologic charter.

 

   

If you abstain from voting or do not vote (either in person or by proxy), or fail to direct your broker how to vote, it will have NO EFFECT on the proposals to approve the issuance of shares of Hologic common stock to Cytyc stockholders in the merger, the Hologic, Inc. Senior Executive Short-Term Incentive Plan, the amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan or to adjourn the Hologic special meeting to solicit additional proxies in favor of any of the foregoing proposals to be acted upon at the Hologic special meeting.

Cytyc stockholders.

 

   

If you abstain from voting or do not vote (either in person or by proxy), or fail to direct your broker how to vote, it will have the same effect as a vote AGAINST the proposal to adopt the merger agreement and the transactions contemplated thereby, including the merger.

 

   

If you abstain from voting or do not vote (either in person or by proxy), or fail to direct your broker how to vote, it will have NO EFFECT on the proposal to adjourn the Cytyc special meeting to solicit additional proxies in favor of the proposal to adopt the merger agreement.

 

Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A: Your broker is not permitted to decide how your shares should be voted. Your broker will only vote your shares on a proposal if you provide your broker with voting instructions on that proposal. You should instruct your broker to vote your shares by following the directions that your broker provides you. Please check the voting information form used by your broker to see if it offers telephone or Internet voting.

 

Q: What if I fail to instruct my broker?

 

A: If you fail to instruct your broker to vote your shares, they will not be voted at your company’s special meeting and will have the consequences set forth under “Why is my vote important?”

 

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Q: What will happen if I return my proxy card without indicating how to vote?

 

A. If you sign and send in your proxy and do not indicate how you want to vote on any particular proposal, the Hologic or Cytyc common stock represented by your proxy will be voted “FOR” that proposal.

 

Q: What do I do if I want to change my vote?

 

A: You can change your vote at any time before your proxy is voted at your company’s special meeting. You can do this in one of four ways:

 

   

you can send a signed notice of revocation;

 

   

you can grant a new, valid proxy by executing a new proxy card bearing a later date;

 

   

you can vote at a later time by telephone or through the Internet; or

 

   

if you are a holder of record, you can attend the applicable special meeting and vote in person, but your attendance alone will not revoke any proxy that you have previously given.

 

     If you choose either of the first two methods, your notice of revocation or your new proxy must be received by your company’s corporate secretary at the address provided under “The Companies” beginning on page 7 no later than the beginning of the applicable special meeting. If you are a Hologic stockholder, you can find further details on how to revoke your proxy in “The Hologic Special Meeting—Revocation of Proxies” beginning on page 139. If you are a Cytyc stockholder, you can find further details on how to revoke your proxy in “The Cytyc Special Meeting—Revocation of Proxies” beginning on page 142.

 

     If you hold your shares in “street name,” please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.

 

Q: Can I dissent and require appraisal of my shares?

 

A: Hologic stockholders. Under Delaware law, Hologic stockholders have no right to an appraisal of the “fair value” of their shares in connection with the merger.

 

     Cytyc stockholders. Under Delaware law, instead of receiving the merger consideration, Cytyc stockholders are entitled to demand to have the “fair value” of their shares at the effective time of the merger judicially determined and paid to them in cash. A stockholder who desires to exercise appraisal rights must (i) not vote in favor of the merger, (ii) deliver a written demand for appraisal of his or her shares to the corporate secretary of Cytyc before the vote on the merger at the Cytyc special meeting and (iii) otherwise comply with the provisions of Delaware law. You should carefully read and follow the instructions under “The Merger—Appraisal Rights” beginning on page 107 if you wish to exercise your appraisal rights.

 

Q: What do I do now?

 

A: Carefully read and consider the information contained in and incorporated by reference into this joint proxy statement/prospectus, including its annexes.

In order for your shares to be represented at your special stockholders’ meeting:

 

   

you can vote by telephone or through the Internet by following the instructions included on your proxy card;

 

   

you can indicate on the enclosed proxy card how you would like to vote and sign and return the proxy card in the accompanying pre-addressed postage paid envelope; or

 

   

you can attend your special meeting and vote in person.

 

     If you hold your shares in “street name,” please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.

 

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Q: Should stockholders send in their stock certificates with their proxies?

 

A: No. Cytyc stockholders should not send in their stock certificates at this time. If the merger is completed, Hologic’s exchange agent will send former Cytyc stockholders a letter of transmittal and written instructions explaining what they must do to exchange their Cytyc stock certificates or transfer uncertificated shares for the merger consideration payable to them.

 

     Hologic stockholders will retain their current stock certificates after the merger and should not send in their stock certificates.

 

Q: When do you expect to complete the merger?

 

A: Hologic and Cytyc are working to complete the merger as quickly as practicable. However, Hologic and Cytyc cannot assure you when or if the merger will be completed. Completion of the merger is subject to satisfaction or waiver of the conditions specified in the merger agreement, including receipt of the necessary approvals of each of Hologic’s and Cytyc’s stockholders at their respective special meetings and any necessary regulatory approvals. It is possible that factors outside the control of both companies could result in the merger being completed later than expected. Although the exact timing of completion of the merger cannot be predicted with certainty, Hologic and Cytyc anticipate completing the merger in mid-October 2007. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 129.

 

Q: Whom should I call with questions?

 

A: Hologic Stockholders. If you have additional questions about the merger or the other matters to be voted on at the Hologic special meeting or if you desire additional copies of this joint proxy statement/prospectus or you need assistance voting your shares, you should contact:

LOGO

105 Madison Avenue

New York, NY 10016

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

 

     Cytyc Stockholders. If you have additional questions about the merger or the other matters to be voted on at the Cytyc special meeting or if you desire additional copies of this joint proxy statement/prospectus or you need assistance voting your shares, you should contact:

Morrow & Co., Inc.

470 West Avenue

Stamford, CT 06902

(203) 658-9400

Banks and Brokerage Firms, Please Call: (203) 658-9400

Stockholders Call Toll-Free: (800) 607-0088

 

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SUMMARY

This summary highlights information contained elsewhere in this joint proxy statement/prospectus. It does not contain all of the information that may be important to you. You are urged to read carefully this entire joint proxy statement/prospectus, including the attached annexes, and the other documents to which this joint proxy statement/prospectus refers you in order for you to fully understand the proposed merger. See “Where You Can Find More Information” beginning on page 197. Each item in this summary refers to the page of this joint proxy statement/prospectus on which that subject is discussed in more detail.

The Companies

Hologic, Inc. (see page 115)

Hologic, Inc.

35 Crosby Drive

Bedford, MA 01730

(781) 999-7300

http://www.hologic.com1

Hologic is a leading developer, manufacturer and supplier of diagnostic and medical imaging systems primarily dedicated to serving the healthcare needs of women. Hologic focuses its resources on developing systems and subsystems offering superior image quality and diagnostic accuracy, which has enabled it to capture significant market share and customer loyalty, despite the presence of large competitors.

Hologic’s core women’s healthcare business units are focused on mammography and breast care, and osteoporosis assessment. Its mammography and breast care products include a broad product line of breast imaging and related products, including film-based and digital mammography systems, computer-aided detection (CAD), breast biopsy systems and breast biopsy and tissue extraction devices. Hologic’s Lorad line of mammography systems and its bone densitometry product line are premier brands in their markets. Hologic’s newly acquired CAD product lines from R2 Technology, Inc. and breast biopsy devices and tissue extraction product lines from Suros Surgical Systems, Inc. also hold positions of industry prominence in their areas of application. Hologic’s osteoporosis assessment products primarily consist of dual-energy X-ray bone densitometry systems and an ultrasound-based osteoporosis assessment product. Hologic’s other business unit includes: Fluoroscan mini C-arm imaging products, Esaote line of extremity MRI (Magnetic Resonance Imaging) systems which are manufactured by an original equipment manufacturer and photoconductor coating business, which Hologic acquired in connection with its acquisition of AEG Electrofotografie GmbH and its group of related companies. Hologic’s customers include hospitals, imaging clinics and private practices, many of the leading healthcare organizations in the world and major pharmaceutical companies utilizing Hologic’s products in conducting clinical trials.

 

 


1

The information contained on Hologic’s website is expressly not incorporated by reference into this joint proxy statement/prospectus.

 

 

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Nor’easter Corp. (see page 115)

Nor’easter Corp.

35 Crosby Drive

Bedford, MA 01730

(781) 999-7300

Nor’easter Corp. is a wholly owned subsidiary of Hologic that was incorporated in Delaware in May 2007. Nor’easter does not engage in any operations and exists solely to facilitate the merger.

Cytyc Corporation (see page 116)

Cytyc Corporation

250 Campus Drive

Marlborough, MA 01752

(508) 263-2900

http://www.cytyc.com2

Cytyc is a diversified diagnostic and medical device company that designs, develops, manufactures, and markets innovative and clinically effective diagnostic and surgical products. Cytyc’s products cover a range of cancer and women’s health applications, including cervical cancer screening, pre-term birth risk assessment treatment of excessive menstrual bleeding, radiation treatment of early-stage breast cancer, and radiation treatment of patients with malignant brain tumors.

Cytyc operates its business in three reportable segments: domestic diagnostic products, domestic surgical products and international. Cytyc’s domestic diagnostic products segment develops and markets the ThinPrep® System in the United States primarily for use in cytology testing applications, such as cervical cancer screening, and FullTerm®, The Fetal Fibronectin Test, acquired as part of Cytyc’s purchase of Adeza Biomedical Corporation, which offers clinical and cost benefits for the assessment of the risk of pre-term birth. Cytyc’s domestic surgical products segment develops and markets the NovaSure® System, an innovative endometrial ablation device to treat menorrhagia, or excessive menstrual bleeding, the MammoSite® Radiation Therapy System, a device for the treatment of early-stage breast cancer that positions radiation sources directly into the post-lumpectomy site to optimize radiation treatment delivery while minimizing damage to healthy tissue, and the GliaSite® Radiation Therapy System for the treatment of malignant brain tumors. The domestic surgical segment, as part of Cytyc’s purchase of Adiana Inc., acquired the Adiana Complete Transcervical Sterilization System®, TCS, which is a form of permanent female contraception intended as an alternative to tubal ligation and for which Cytyc is in the process of seeking a pre-market approval from the U.S. Food and Drug Administration. The domestic surgical products segment markets these products in the United States. Cytyc’s international segment markets its diagnostic and surgical products outside of the United States.

 

 


2

The information contained on Cytyc’s website is expressly not incorporated by reference into this joint proxy statement/prospectus.

 

 

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The Merger

The Agreement and Plan of Merger, dated as of May 20, 2007, among Hologic, Cytyc and Nor’easter Corp., which is referred to as the merger agreement, is attached as Annex A to this joint proxy statement/prospectus. Cytyc and Hologic encourage you to read carefully the merger agreement in its entirety because it is the principal legal agreement that governs the merger.

Structure of the Merger (see page 117)

Subject to the terms and conditions of the merger agreement, at the effective time of the merger, Cytyc will merge with and into Nor’easter Corp., a wholly owned subsidiary of Hologic that was formed for the purpose of the merger, with Nor’easter Corp. surviving the merger as a direct, wholly owned subsidiary of Hologic. At the effective time of the merger, Nor’easter Corp. will be renamed “Cytyc Corporation.”

Merger Consideration (see page 117)

Cytyc stockholders. As a result of the merger, Cytyc stockholders will be entitled to receive, for each issued and outstanding share of Cytyc common stock that they own immediately prior to the effective time of the merger, 0.52 of a share, referred to as the exchange ratio, of Hologic common stock, referred to as the stock merger consideration, and $16.50 in cash without interest, referred to as the cash merger consideration. The combined company will not issue any fractional shares of Hologic common stock in the merger. Instead, Cytyc stockholders will receive cash in lieu of any fractional shares of Hologic common stock that they would have otherwise received in the merger. The amount of cash for fractional shares will be calculated by multiplying the fraction of a share of Hologic common stock to which the Cytyc stockholder would be entitled to receive in the merger by the closing sale price of a share of Hologic common stock on the closing date of the merger. The stock merger consideration, together with the cash merger consideration and any cash received in lieu of fractional shares, is referred to as the merger consideration.

Hologic stockholders. Hologic stockholders will continue to own their existing shares of Hologic common stock after the merger. Hologic stockholders should not send in their stock certificates in connection with the merger.

Ownership of the Combined Company After the Merger

Hologic will issue approximately 65.1 million shares of Hologic common stock to Cytyc stockholders in the merger based on the number of shares of Cytyc common stock outstanding on June 30, 2007, assuming conversion of all of Cytyc’s outstanding 2.25% Senior Convertible Notes due 2024. At the completion of the merger, it is expected that there will be outstanding approximately 119.1 million shares of common stock of the combined company. The shares of Hologic common stock issued to former Cytyc stockholders in the merger will represent approximately 55% of the outstanding common stock of the combined company immediately after the merger. Shares of Hologic common stock held by current Hologic stockholders will represent approximately 45% of the outstanding common stock of the combined company immediately after the merger.

 

 

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Recommendations to Stockholders

Recommendations to Hologic stockholders. The Hologic board of directors has unanimously determined that the merger agreement and the merger and other transactions contemplated therein, including an amendment to the Hologic charter and the issuance of Hologic common stock in the merger are advisable to and in the best interests of Hologic and its stockholders. The Hologic board of directors recommends that Hologic stockholders vote:

 

   

“FOR” an amendment to the Hologic charter to increase the authorized number of shares of Hologic common stock from 90,000,000 to 300,000,000 shares;

 

   

“FOR” the issuance of Hologic common stock to Cytyc stockholders in the merger;

 

   

“FOR” the approval of the Hologic, Inc. Senior Executive Short-Term Incentive Plan;

 

   

“FOR” the approval of the amendment to the Hologic’s Second Amended and Restated 1999 Equity Incentive Plan; and

 

   

“FOR” the adjournment of the special meeting, including, if necessary, to solicit additional proxies in favor of any of the foregoing proposals.

For additional information see “The Hologic Special Meeting—Board Recommendations” beginning on page 135.

Recommendations to Cytyc stockholders. The Cytyc board of directors has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of Cytyc and its stockholders. The Cytyc board of directors recommends that Cytyc stockholders vote:

 

   

“FOR” the adoption of the merger agreement and the transactions contemplated thereby, including the merger; and

 

   

“FOR” the adjournment of the special meeting, including, if necessary, to solicit additional proxies in favor of the foregoing proposal.

For additional information see “The Cytyc Special Meeting—Board Recommendations” beginning on page 140.

Opinions of Financial Advisors (see pages 62 and 84)

Hologic (See page 62)

Hologic’s financial advisors, Goldman, Sachs & Co., which is referred to as Goldman Sachs, and Jefferies & Company, Inc., which is referred to as Jefferies, each delivered their respective opinions to the Hologic board of directors that, as of the date of the fairness opinion and based upon and subject to the assumptions, procedures, factors, limitations and qualifications set forth therein, the merger consideration to be paid for each outstanding share of Cytyc common stock, taken in the aggregate, to be paid pursuant to the merger agreement was fair, from a financial point of view, to Hologic.

The full text of the written opinion of each of Goldman Sachs and Jefferies, each dated May 20, 2007, which sets forth assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken in connection with each of their opinions, is attached hereto as Annex C and Annex D, respectively. Goldman Sachs and Jefferies provided their opinions for the information and assistance of the Hologic board of directors in connection with its consideration of the merger. The Goldman Sachs and Jefferies

 

 

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opinions are not a recommendation as to how any holder of Hologic common stock or Cytyc common stock should vote at any stockholders’ meeting to be held in connection with, or take any action with respect to, the merger.

Cytyc (See page 84)

Cytyc’s financial advisors, Morgan Stanley & Co. Incorporated, which is referred to as Morgan Stanley, and J.P. Morgan Securities Inc., which is referred to as JPMorgan, each delivered their respective opinions to the Cytyc board of directors to the effect that, as of the date of the fairness opinion and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be received by the holders of Cytyc common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of each of Morgan Stanley and JPMorgan, each dated May 20, 2007, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with each of their opinions, is attached hereto as Annex E and Annex F, respectively. Morgan Stanley and JPMorgan provided their opinions for the information and assistance of the Cytyc board of directors in connection with its consideration of the merger. The Morgan Stanley and JPMorgan opinions are not recommendations as to how any holder of Cytyc common stock or Hologic common stock should vote on, or take any action with respect to, the merger.

Treatment of Cytyc Stock Options and Other Equity–Based Awards (see page 118)

Outstanding Cytyc stock options at the effective time of the merger will be converted into options to purchase Hologic common stock, with appropriate adjustments made to the number of shares and the exercise price under those options based on the value of the merger consideration. Outstanding Cytyc restricted stock units at the effective time of the merger will be converted into the right to receive, on the same terms and conditions as were applicable to the Cytyc restricted stock units, Hologic common stock, with appropriate adjustments made to the number of shares based on the value of the merger consideration. Outstanding Cytyc performance shares and accrued shares issuable to Cytyc directors will vest as of the effective time of the merger and the holders thereof will be entitled to receive the merger consideration on the same basis as all other shares of Cytyc common stock. Outstanding deferred shares granted under Cytyc’s amended and restated director compensation plan will, at the effective time of the merger, be converted into shares of Hologic common stock based on the value of the merger consideration.

Interests of Hologic’s and Cytyc’s Executive Officers and Directors in the Merger (see pages 75 and 95)

When you consider the Hologic and Cytyc board of directors’ respective recommendations that stockholders vote in favor of the proposals described in this joint proxy statement/prospectus, you should be aware that (i) some Cytyc executive officers and directors may have interests that may be different from, or in addition to, Cytyc stockholders’ interests, including but not limited to, their receipt of change of control payments under existing Cytyc change of control agreements in connection with the merger, entry into new change of control agreements and retention and severance agreements with Hologic, new employment arrangements with Hologic, accelerated vesting of Cytyc stock options and other equity awards at the effective time of the merger, and the right of Cytyc’s executive officers and directors to continued indemnification and insurance coverage for acts or omissions occurring before the merger; and (ii) some Hologic executive officers and directors may have interests that may be different from, or in addition to, Hologic stockholders’ interests, including but not limited to, accelerated vesting of stock options and other equity awards upon completion of the merger, payments under change of control agreements in connection with the merger, and a new retention and severance agreement for one executive officer.

 

 

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Appraisal Rights (see page 107)

Under the General Corporation Law of the State of Delaware, referred to as the DGCL, instead of receiving the merger consideration, Cytyc stockholders are entitled to demand to have the “fair value” of their shares at the effective time of the merger judicially determined and paid to them in cash. A stockholder who desires to exercise appraisal rights must (i) not vote in favor of the merger, (ii) deliver a written demand for appraisal of his or her shares to the corporate secretary of Cytyc before the vote on the merger at the Cytyc special meeting and (iii) otherwise comply with the provisions of the DGCL. You should carefully read and follow the instructions under “The Merger—Appraisal Rights” commencing on page 107 if you wish to exercise your appraisal rights.

Under the DGCL, Hologic stockholders have no right to an appraisal of the “fair value” of their shares in connection with the merger.

Material United States Federal Income Tax Consequences of the Merger (see page 111)

Hologic and Cytyc intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. If you are a Cytyc stockholder, you generally will recognize income or gain for U.S. federal income tax purposes equal to the lesser of (i) the amount of cash (excluding cash that you receive in lieu of fractional shares of Hologic common stock) that you receive and (ii) the amount of gain that you realize, which generally is equal to the sum of (a) the amount of cash that you receive plus (b) the fair market value of any Hologic common stock that you receive, over your tax basis in the shares of Cytyc common stock that you surrender pursuant to the merger. Your income or gain may vary if you acquired your Cytyc common stock in more than one transaction. In addition, if you receive cash in lieu of a fractional share of Hologic common stock, you will recognize gain or loss based on the difference between the cash you receive for such fractional share and your tax basis allocable to the fractional share.

You should read “Material United States Federal Income Tax Consequences of the Merger” beginning on page 111 for a more complete discussion of the U.S. federal income tax consequences of the merger.

If you are a Hologic stockholder, you will simply retain your shares of Hologic common stock, and the merger therefore will not be taxable to you.

Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. We recommend that you consult your tax advisor to determine the tax consequences of the merger to you.

Accounting Treatment (see page 105)

Hologic prepares its financial statements in accordance with U.S. GAAP. The merger will be accounted for using the purchase method of accounting. As discussed under “The Merger—Accounting Treatment” on page 105, based on the facts that Hologic board members and senior management will control and represent a majority of the board of directors and senior management of the combined company, as well as the terms of the exchange, pursuant to which Cytyc stockholders will receive a premium of approximately 32.5% (as of the date preceding the merger announcement) over the fair market value of their shares on such date and cash of $16.50 per share (or approximately 36.0% of the merger consideration), Hologic is considered to be the acquirer of Cytyc for accounting purposes. This means that Hologic will allocate the purchase price to the fair value of Cytyc’s assets and liabilities at the effective time of the merger, with the excess purchase price being recorded as goodwill. Under the purchase method of accounting, goodwill is not amortized but is tested for impairment at least annually.

 

 

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Regulatory Approvals (see page 114)

Hologic and Cytyc have each agreed to use their reasonable best efforts in order to obtain all regulatory approvals required in order to complete the merger. These approvals include approvals by the U.S. Federal Trade Commission, the U.S. Department of Justice and state antitrust authorities. Hologic and Cytyc each submitted their antitrust filings with the U.S. Department of Justice and the U.S. Federal Trade Commission on June 1, 2007, which commenced the initial waiting period of 30 days. On July 2, 2007, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, referred to as the HSR Act, expired without a request for additional information. Based on the review and analyses performed, Hologic and Cytyc do not believe that any other antitrust related filings are required in any foreign jurisdictions.

Listing of Hologic Common Stock (see page 128)

Hologic has agreed to use its commercially reasonable efforts to cause the shares of Hologic common stock to be issued in the merger to be approved for listing on the Nasdaq Global Select Market.

Conditions to Completion of the Merger (see page 129)

The obligations of each of Hologic and Cytyc to complete the merger are subject to the satisfaction at or before the effective time of the merger of a number of mutual conditions, including the following:

 

   

adoption of the merger agreement and the transactions contemplated thereby, including the merger, by Cytyc stockholders;

 

   

approval of the amendment to the Hologic charter to increase the number of authorized shares of common stock and the issuance of the Hologic common stock in the merger, by Hologic stockholders;

 

   

absence of any applicable law, rule, order, injunction or judgment prohibiting or preventing the completion of the merger;

 

   

the applicable waiting period under the HSR Act or under any similar foreign statutes or regulations applicable to the merger shall have expired or terminated or, where applicable, approval shall have been obtained, except where the failure of which to expire, terminate or be obtained would not reasonably be expected to materially and adversely affect Cytyc or Hologic, taken as a whole, or would not reasonably be expected to result in criminal liability;

 

   

Hologic’s registration statement on Form S-4, which includes this joint proxy statement/prospectus, being effective and not subject to any SEC stop order;

 

   

approval for the listing on the Nasdaq Global Select Market of the shares of Hologic common stock to be issued in the merger subject to official notice of issuance;

 

   

receipt of all required approvals of any governmental body, agency, official or authority, except those that would not reasonably be expected to (i) materially and adversely diminish the benefits expected to be derived by the parties on the date of the merger agreement from the combination of Hologic and Cytyc (the combined business to be taken as a whole); or (ii) otherwise have a regulatory material adverse effect as described in the merger agreement; and

 

   

absence of any applicable law, rule, order, injunction or judgment enacted or deemed applicable to the merger that would reasonably be expected to (i) materially and adversely diminish the benefits expected to be derived by the parties on the date of the merger agreement from the combination of Hologic and Cytyc (the combined business to be taken as a whole); or (ii) otherwise have a regulatory material adverse effect as described in the merger agreement.

 

 

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In addition, the obligations of each of Hologic and Cytyc to complete the merger are subject to the satisfaction or waiver at or before the effective time of the merger of the following additional conditions:

 

   

the other party shall have performed in all material respects all of its obligations required to be performed by it at or prior to the effective time;

 

   

the representations and warranties of the other party shall be accurate, to the extent specified in the merger agreement;

 

   

no material adverse effect, as defined in the merger agreement, shall have occurred and be continuing with respect to the other party since May 20, 2007; and

 

   

receipt of opinions of counsel to that party that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, and that Hologic, Cytyc and Nor’easter Corp. will qualify as parties to a reorganization within the meaning of Section 368(b) of the Code.

The obligations of Hologic to complete the merger are further conditioned on the requirement that holders of no greater than 10% of the issued and outstanding common stock of Cytyc shall have demanded appraisal for such shares in accordance with the DGCL.

Termination of the Merger Agreement (see page 130)

Hologic and Cytyc can mutually agree to terminate the merger agreement at any time. Either company may also terminate the merger agreement, under specified circumstances, if the merger is not completed by November 16, 2007, or under other circumstances described in this joint proxy statement/prospectus.

Expenses and Termination Fees (see page 132)

Generally, all fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring those expenses, subject to the specific exceptions discussed in this joint proxy statement/prospectus. The merger agreement provides that, upon termination of the merger agreement under specified circumstances described elsewhere in this joint proxy statement/prospectus, Cytyc may be required to pay Hologic a termination fee of $50 million (referred to as a Hologic reduced fee) or $150 million (referred to as a Hologic rejection fee) or Hologic may be required to pay Cytyc a termination fee of $33 million (referred to as a Cytyc reduced fee) or $100 million (referred to as a Cytyc rejection fee), in each case, depending on the termination event.

Headquarters (see page 106)

The combined company’s corporate headquarters will be located at 35 Crosby Drive, Bedford, Massachusetts 01730. The headquarters of the Cytyc business will continue to be located in Marlborough, Massachusetts.

Executive Officers (see page 106)

Hologic and Cytyc have agreed that at the effective time of the merger, John W. Cumming will be the chief executive officer of Hologic and Patrick J. Sullivan will be the chairman of the Hologic board of directors. In addition, at the effective time of the merger, Dr. Jay A. Stein, currently chairman emeritus, director and chief technical officer of Hologic, will serve as chairman emeritus and chief technical officer of Hologic.

 

 

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Board of Directors and Corporate Governance After the Merger (see page 105)

In connection with the merger, the parties have reached certain agreements regarding the governance of Hologic at the effective time of the merger, including the following:

 

   

Hologic Board of Directors. The board of directors of Hologic will consist of eleven directors, six of whom will be designated by Hologic and five of whom will be designated by Cytyc. Four of the six persons designated by Hologic will be “independent” directors as defined under applicable Nasdaq listing standards, and the remaining two persons will be John W. Cumming, current chairman and chief executive officer of Hologic, and Glenn P. Muir, current chief financial officer of Hologic. Three of the five persons designated by Cytyc will be “independent” directors as defined under applicable Nasdaq listing standards, and the remaining two persons will be Patrick J. Sullivan, current chairman, chief executive officer and president of Cytyc, and Daniel J. Levangie, current executive vice president of Cytyc and president of Cytyc surgical products.

 

   

Committees of the Hologic Board of Directors. The board of directors of Hologic will have audit, compensation, nominating and corporate governance, and corporate development committees. The audit, nominating and corporate governance and corporate development committees will each consist of an odd number of directors, consisting of one more continuing Hologic director than continuing Cytyc directors, and the chairman of each of these committees will be a continuing Hologic director. The compensation committee will consist of an even number of directors, consisting of an equal number of continuing Cytyc directors and continuing Hologic directors, and the chairman of the compensation committee will be a continuing Cytyc director.

Hologic Bylaws Amendment (see page 156)

In connection with approving the merger agreement, Hologic’s board of directors approved amendments to Hologic’s bylaws, which will become effective only upon completion of the merger. These amendments include provisions giving effect to the governance provisions described above under “—Board of Directors and Corporate Governance After the Merger” and providing for mandatory indemnification for directors and officers to the extent permitted by Delaware law.

Special Meetings of Hologic and Cytyc Stockholders

Hologic Special Meeting (see page 135)

Meeting. The Hologic special meeting will be held on October 18, 2007, at 9:00 a.m., local time, at Hologic’s principal executive offices located at 35 Crosby Drive, Bedford, Massachusetts 01730. At the Hologic special meeting, Hologic stockholders will be asked:

 

   

to approve an amendment to Hologic’s charter, effective immediately prior to the effective time of the merger, to increase the authorized number of shares of Hologic common stock from 90,000,000 to 300,000,000 shares;

 

   

to approve the issuance of Hologic common stock to Cytyc stockholders in the merger;

 

   

to approve the Hologic, Inc. Senior Executive Short-Term Incentive Plan;

 

   

to approve the amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan; and

 

   

if submitted to a vote of Hologic stockholders, to approve an adjournment of the Hologic special meeting, including, if necessary, to solicit additional proxies in favor of any of the foregoing proposals.

 

 

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Record Date; Votes. Hologic has fixed the close of business on August 22, 2007 as the record date, which is referred to as the Hologic record date, for determining the Hologic stockholders entitled to receive notice of and to vote at the Hologic special meeting. Only holders of record of Hologic common stock on the Hologic record date are entitled to receive notice of and vote at the Hologic special meeting, and any adjournment or postponement thereof.

Each share of Hologic common stock is entitled to one vote. On the Hologic record date, there were approximately 53,947,712 shares of Hologic common stock entitled to vote at the Hologic special meeting.

Required Vote. The Hologic proposals require different percentages of votes for approval:

 

   

the proposal to amend the Hologic charter requires the affirmative vote of a majority of the outstanding shares of Hologic common stock entitled to vote on the proposal;

 

   

the proposal to issue shares of Hologic common stock to Cytyc stockholders in the merger, the proposal to approve the Hologic, Inc. Senior Executive Short-Term Incentive Plan, and the proposal to approve the amendment to Hologic’s Second Amended and Restated Equity Incentive Plan each require the affirmative vote of a majority of the votes cast in person or by proxy at the Hologic special meeting; and

 

   

the proposal to adjourn the Hologic special meeting, including, if necessary, to solicit additional proxies if there are not sufficient votes for the foregoing proposals requires the affirmative vote of a majority of votes cast in person or by proxy, whether or not a quorum is present at the Hologic special meeting.

The proposal to amend the Hologic charter and the proposal to issue shares of Hologic common stock to Cytyc stockholders in the merger are conditioned on one another and the approval of each of these proposals is a condition to the completion of the merger. Neither the amendment to the Hologic charter nor the issuance of the Hologic common stock to Cytyc stockholders in the merger will take place unless both of these proposals are approved by the Hologic stockholders. Therefore, the merger cannot be completed without the approval of both proposals.

Stock Ownership of Hologic Directors and Executive Officers. On August 22, 2007, the Hologic record date, directors and executive officers of Hologic and their respective affiliates owned and were entitled to vote approximately 331,330 shares of Hologic common stock, or approximately 0.6% of the shares of Hologic common stock outstanding on that date. To Hologic’s knowledge, the directors and executive officers of Hologic and their respective affiliates intend to vote their shares of Hologic common stock in favor of all Hologic proposals at the Hologic special meeting.

Cytyc Special Meeting (see page 140)

Meeting. The Cytyc special meeting will be held on October 18, 2007, at 9:00 a.m., local time, at The Hilton Boston Logan Airport, One Hotel Drive, Boston, Massachusetts 02128. At the Cytyc special meeting, Cytyc stockholders will be asked:

 

   

to adopt the merger agreement and the transactions contemplated thereby, including the merger, pursuant to which Cytyc will become a wholly owned subsidiary of Hologic; and

 

   

if submitted to a vote of Cytyc stockholders, to approve an adjournment of the Cytyc special meeting, including, if necessary, to solicit additional proxies in favor of the adoption of the merger agreement if there are not sufficient votes for such proposal.

Record Date; Votes. Cytyc has fixed the close of business on August 22, 2007 as the record date, which is referred to as the Cytyc record date, for determining the Cytyc stockholders entitled to receive notice of and to vote at the Cytyc special meeting. Only holders of record of Cytyc common stock on the Cytyc record date are entitled to receive notice of and vote at the Cytyc special meeting, and any adjournment or postponement thereof.

 

 

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Each share of Cytyc common stock is entitled to one vote. On the Cytyc record date, there were 117,627,349 shares of Cytyc common stock entitled to vote at the Cytyc special meeting.

Required Vote. The proposals require different percentages of votes in order to approve them:

 

   

the proposal for the adoption of the merger agreement and the transactions contemplated thereby, including the merger, requires the affirmative vote of a majority of the outstanding shares of Cytyc common stock entitled to vote at the Cytyc special meeting; and

 

   

the proposal to adjourn the Cytyc special meeting, including, if necessary, to solicit additional proxies in favor of the proposal to adopt the merger agreement, requires the affirmative vote of a majority of the votes cast by stockholders present in person or represented by proxy, whether or not a quorum is present, at the Cytyc special meeting.

Adoption of the merger agreement and the transactions contemplated thereby, including the merger, by Cytyc stockholders is a condition to the completion of the merger.

Stock Ownership of Directors and Executive Officers. On August 22, 2007, the Cytyc record date, directors and executive officers of Cytyc and their respective affiliates owned and were entitled to vote 446,436 shares of Cytyc common stock, or approximately 0.38% of the shares of Cytyc common stock outstanding on that date. To Cytyc’s knowledge, the directors and executive officers of Cytyc and their respective affiliates intend to vote their shares of Cytyc common stock in favor of all Cytyc proposals at the Cytyc special meeting.

 

 

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Selected Historical Consolidated Financial Data of Hologic

The following tables set forth the selected historical consolidated financial and operating data for Hologic. The selected consolidated statement of income data for the fiscal years ended September 30, 2006, September 24, 2005 and September 25, 2004, and the selected balance sheet data as of September 30, 2006 and September 24, 2005 are derived from Hologic’s audited consolidated financial statements incorporated by reference into this joint proxy statement/prospectus. The selected consolidated statement of income data for the fiscal years ended September 27, 2003 and September 28, 2002, and the selected balance sheet data as of September 25, 2004, September 27, 2003 and September 28, 2002 are derived from Hologic’s audited consolidated financial statements not included or incorporated by reference into this joint proxy statement/prospectus. The selected consolidated statement of income data for the nine months ended June 30, 2007 and June 24, 2006, and the selected balance sheet data as of June 30, 2007 have been derived from Hologic’s unaudited consolidated condensed financial statements incorporated by reference into this joint proxy statement/prospectus. The interim consolidated financial data, in the opinion of Hologic management, reflect all adjustments of a normal recurring nature necessary for a fair statement of Hologic’s financial position and results of operations at the dates and for the periods indicated. The results for the nine months ended June 30, 2007 are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year.

Hologic’s historical financial data may not be indicative of the results of operations or financial position to be expected in the future.

You should read this selected historical consolidated financial data of Hologic in conjunction with Hologic’s consolidated financial statements and the related notes to those financial statements and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in Hologic’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006 and Hologic’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2007, which have been filed with the SEC and are incorporated by reference into this joint proxy statement/prospectus.

 

    Nine Months
Ended
 

Fiscal Years Ended

    June 30,
2007
  June 24,
2006
  September 30,
2006
    September 24,
2005
  September 25,
2004
  September 27,
2003
  September 28,
2002
       

(In thousands, except per share data)

Consolidated Statement of Income Data

             

Revenues:

             

Product sales

  $ 457,337   $ 257,604   $ 388,111     $ 229,075   $ 177,936   $ 156,734   $ 144,684

Service and other revenue

    78,467     51,021     74,569       58,609     50,769     47,301     45,508
                                           
    535,804     308,625     462,680       287,684     228,705     204,035     190,192
                                           

Costs and Expenses:

             

Cost of product sales

    193,526     124,642     186,862       116,478     94,762     86,506     84,230

Cost of product sales—amortization of intangible assets

    8,335     2,113     4,784       911     911     911     911

Cost of service and other revenue

    85,925     53,491     77,502       58,181     48,574     43,949     34,146

Research and development

    33,221     18,288     28,294       18,617     16,659     18,381     20,362

Selling and marketing

    61,660     34,838     55,910       34,199     31,761     29,978     28,319

General and administrative

    47,738     27,156     42,551       26,667     23,452     21,285     17,997

Amortization of acquired intangible assets

    4,145     518     1,631       —       —       —       —  

Net gain on sale of intellectual property

    —       —       (5,093 )     —       —       —       —  

Acquired research and development

    —       4,800     19,900       —       —       —       —  

Restructuring and relocation

    —       —       —         —       —       —       2,070
                                           
    434,550     265,846     412,341       255,053     216,119     201,010     188,035
                                           

 

 

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    Nine Months
Ended
   

Fiscal Years Ended

 
    June 30,
2007
    June 24,
2006
    September 30,
2006
    September 24,
2005
    September 25,
2004
    September 27,
2003
    September 28,
2002
 
         

(In thousands, except per share data)

 

Income from operations

    101,254       42,779       50,339       32,631       12,586       3,025       2,157  

Interest income

    1,630       3,454       4,082       2,219       540       685       573  

Interest/other expense

    (2,126 )     (536 )     (1,198 )     (155 )     (199 )     (445 )     (2,980 )
                                                       

Income (loss) before provision (benefit) for income taxes and cumulative effect of change in accounting principle

    100,758       45,697       53,223       34,695       12,927       3,265       (250 )

Provision (benefit) for income taxes

    38,290       16,800       25,800       6,439       763       176       (429 )
                                                       

Income before cumulative effect of change in accounting principle

    62,468       28,897       27,423       28,256       12,164       3,089       179  

Cumulative effect of change in accounting principle

    —         —         —         —         —         (207 )     —    
                                                       

Net income

  $ 62,468     $ 28,897     $ 27,423     $ 28,256     $ 12,164     $ 2,882     $ 179  
                                                       

 

   

Nine Months
Ended

 

Fiscal Years Ended

    June 30,
2007
  June 24,
2006
  September 30,
2006
  September 24,
2005
  September 25,
2004
  September 27,
2003
    September 28,
2002
       

(In thousands, except per share data)

Basic income per common and common equivalent share (1):

             

Income before cumulative effect of change in accounting principle

  $ 1.17   $ 0.64   $ 0.59   $ 0.66   $ 0.30   $ 0.08     $ 0.00

Cumulative effect of change in accounting principle

    —       —       —       —       —       (0.01 )     —  
                                           

Net income

  $ 1.17   $ 0.64   $ 0.59   $ 0.66   $ 0.30   $ 0.07     $ 0.00
                                           

Diluted income per common and common equivalent share (1):

             

Income before cumulative effect of change in accounting principle

  $ 1.14   $ 0.61   $ 0.56   $ 0.63   $ 0.29   $ 0.08     $ 0.00

Cumulative effect of change in accounting principle

    —       —       —       —       —       (0.01 )     —  
                                           

Net income

  $ 1.14   $ 0.61   $ 0.56   $ 0.63   $ 0.29   $ 0.07     $ 0.00
                                           

Weighted average number of common shares outstanding (1):

             

Basic

    53,246     45,039     46,512     42,824     40,516     39,258       36,837
                                           

Diluted

    54,722     47,221     48,620     45,126     42,593     40,261       38,383
                                           

Consolidated Balance Sheet Data (at period end)

             

Working capital

  $ 184,883     $ 115,743   $ 172,615   $ 118,238   $ 102,699     $ 97,738

Total assets

    933,909       856,205     279,839     211,751     188,603       184,147

Line of credit

    —         55,000     —       —       —         —  

Long-term debt

    7,064       6,163     —       472     1,550       2,268

Total stockholders’ equity

    700,060       605,750     217,834     166,275     148,927       142,409

(1) All share and per share data have been retroactively restated to reflect the 2-for-1 stock split effected on November 30, 2005.

 

 

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Selected Historical Consolidated Financial Data of Cytyc

The following tables set forth the selected historical consolidated financial and operating data for Cytyc. The selected consolidated statement of income data for the fiscal years ended December 31, 2006, 2005 and 2004, and the selected balance sheet data as of December 31, 2006 and 2005 are derived from Cytyc’s audited consolidated financial statements included in this joint proxy statement/prospectus under Annex B. The selected consolidated statement of income data for the fiscal years ended December 31, 2003 and 2002, and the selected balance sheet data as of December 31, 2004, 2003 and 2002 are derived from Cytyc’s selected financial data from its annual report on Form 10-K/A (Amendment No. 2) not included in this joint proxy statement/prospectus. The selected consolidated statement of (loss) income data for the six months ended June 30, 2007 and 2006, and the selected balance sheet data as of June 30, 2007 have been derived from Cytyc’s unaudited consolidated condensed financial statements included in this joint proxy statement/prospectus under Annex B. Cytyc’s unaudited condensed consolidated financial data, in the opinion of Cytyc management, reflect all adjustments of a normal recurring nature necessary for a fair statement of Cytyc’s financial position and results of operations at the dates and for the periods indicated. The results for the six months ended June 30, 2007 are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year.

Subsequent to the filing of its annual report on Form 10-K for fiscal year ended December 31, 2006, Cytyc restated its consolidated financial statements as a result of certain stock option exercise activities. See Note 15 in the notes to Cytyc’s audited consolidated financial statements included in Annex B of this joint proxy statement/prospectus for additional information on the restatement.

Cytyc’s historical financial data may not be indicative of the results of operations or financial position to be expected in the future.

You should read this selected historical consolidated financial data of Cytyc in conjunction with Cytyc’s consolidated financial statements and the related notes to those financial statements and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in this joint proxy statement/prospectus under Annex B.

 

   

Six Months Ended

June 30,

  Years Ended December 31,
    2007   2006   2006   2005   2004   2003   2002
                        (As
Previously
Reported)
  (Restatement
Adjustments)
    (As
Restated)
    (In thousands, except per share amounts)

Statement of (Loss) Income Data:

                 

Net Sales

  $ 357,721   $ 290,937   $ 608,250   $ 508,251   $ 393,593   $ 303,060   $ 236,493   $     $ 236,493

Cost of Sales(1)

    90,379     62,852     134,184     107,149     82,523     57,420     48,622           48,622
                                                       

Gross profit

    267,342     228,085     474,066     401,102     311,070     245,640     187,871           187,871

Operating Expenses:

                 

Research and development(1)

    21,063     20,992     44,134     32,330     20,820     14,724     14,524           14,524

Sales and marketing(1)

    89,352     82,122     161,925     131,346     102,011     79,547     69,971           69,971

General and administrative(1)

    46,490     28,834     63,452     45,298     35,274     28,008     23,125     (17,205 )     5,920

Restructuring(2)

            2,885                          

Arbitration decision(3)

                7,807                      

In-process research and development(4)

    89,500                 19,100                  

Expenses related to terminated merger(5)

                            5,705           5,705
                                                       

Total operating expenses

    246,405     131,948     272,396     216,781     177,205     122,279     113,325     (17,205 )     96,120
                                                       

 

 

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Six Months Ended

June 30,

    Years Ended December 31,
    2007     2006     2006   2005     2004     2003   2002
                              (As
Previously
Reported)
  (Restatement
Adjustments)
  (As
Restated)
    (In thousands, except per share amounts)

Income from operations

    20,937       96,137       201,670     184,321       133,865       123,361     74,546     17,205     91,751

Other income (expense), net(6)

    (2,056 )     (5 )     13,002     (5,603 )     (3,468 )     2,622     2,711         2,711
                                                             

Income before provision for income taxes

    18,881       96,132       214,672     178,718       130,397       125,983     77,257     17,205     94,462

Provision for income taxes

    36,550       35,088       75,135     65,232       56,809       49,763     29,363     3,699     33,062
                                                             

Net (loss) income

  $ (17,669 )     61,044     $ 139,537   $ 113,486     $ 73,588     $ 76,220   $ 47,894   $ 13,506   $ 61,400
                                                             

Net (loss) income per common and potential common share:

                 

Basic

  $ (0.15 )   $ 0.53     $ 1.22   $ 1.00     $ 0.66     $ 0.69   $ 0.40   $ 0.11   $ 0.51
                                                             

Diluted

  $ (0.15 )   $ 0.51     $ 1.16   $ 0.94     $ 0.63     $ 0.68   $ 0.39   $ 0.11   $ 0.50
                                                             

Weighted average common and potential common shares outstanding:

                 

Basic

    115,197       114,917       114,009     113,528       111,148       110,983     120,114         120,114

Diluted

    115,197       125,014       123,759     125,446       121,922       112,807     122,782         122,782

Balance Sheet Data:

                 

Cash, cash equivalents and investment securities

  $ 33,323       $ 297,710   $ 220,619     $ 232,295     $ 177,897   $ 163,744   $   $ 163,744

Total assets(7)

    1,302,818         1,164,714     1,039,879       809,350       390,900     361,626     1,563     363,189

Long-term debt

    250,000         250,000     250,000       250,000                  

Total stockholders’ equity(7)

    791,339         758,973     628,351       487,445       353,631     324,728     1,563     326,291

(1) During the six months ended June 30, 2007 and in fiscal year 2006, Cytyc incurred stock-based compensation expense under SFAS No. 123R (see Note 8 in the notes to the Cytyc interim condensed consolidated financial statements (unaudited) and Note 9 in the notes to the Cytyc consolidated financial statements included in Annex B of this joint proxy statement/prospectus starting on page B-F-2).

 

(2) Cytyc incurred a charge during the fourth quarter of 2006 for severance resulting from its planned transition of its Mountain View, California operations to its operations in Costa Rica and Massachusetts.

 

(3) Cytyc incurred a charge in connection with the DEKA Products Limited Partnership arbitration panel decision in the first quarter of 2005.

 

(4) During the six months ended June 30, 2007, Cytyc incurred in-process research and development charges totaling approximately $43.5 million and $46.0 million related to its acquisition of Adeza Biomedical Corporation and Adiana Inc., respectively, and in fiscal year 2004, approximately $19.1 million related to its acquisition of Novacept.

 

(5) Cytyc incurred charges totaling approximately $5.7 million in 2002 related to its terminated merger with Digene Corporation.

 

(6) Other income (expense), net includes a gain on sale of Vision Systems Limited shares of $13.1 million in 2006, including a realized foreign currency gain of $1.9 million related to this transaction.

 

(7) See Note 15 in the notes to the Cytyc consolidated financial statements included in Annex B of this joint proxy statement/prospectus starting on page B-F-2 for an explanation of the restatement of Cytyc’s consolidated financial statements as a result of certain stock option exercise activities. This restatement affected the statement of income in 2002 presented above, as well as certain balance sheet data (i.e., additional paid-in capital and retained earnings, with no change to total stockholders’ equity, as of December 31, 2006, 2005, 2004 and 2003 and deferred tax assets and total stockholders’ equity as of December 31, 2002) also presented above, primarily to reflect the impact of the restatement on the statements of (loss) income in the years ended December 31, 1996 through 2001, which are not presented above.

 

(8) Cytyc has not issued dividends in any period presented.

 

 

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Summary Unaudited Pro Forma Financial Data

The following unaudited pro forma statements of operations data for the fiscal year ended September 30, 2006 and the nine months ended June 30, 2007 reflect the merger as if it had occurred on September 25, 2005. The following unaudited pro forma balance sheet data at June 30, 2007 reflect the merger as if it had occurred on that date. Such pro forma financial data is based on the historical financial statements of Hologic and Cytyc and gives effect to the merger under the purchase method of accounting for business combinations. As a result, the pro forma financial information is based on certain assumptions and adjustments as discussed in the section titled “Unaudited Pro Forma Condensed Combined Financial Information”, including assumptions relating to the consideration paid and the allocation thereof for the assets and liabilities of Cytyc based on preliminary estimates of their fair value. The following should be read in connection with the sections titled “Unaudited Pro Forma Condensed Combined Financial Information,” and other information included in or incorporated by reference into this joint proxy statement/prospectus. Actual financial statement information in the future may be materially different from the pro forma financial information presented below.

 

Statement of Operations Data

  

Year Ended

September 30, 2006

   

Nine Months Ended

June 30, 2007

    

(In thousands, except per share data)

Revenue

   $ 1,184,573     $ 1,082,133

Income from operations

   $ 124,590     $ 161,410

Net income (loss)

   $ (22,975 )   $ 27,895

Net income (loss) per common and common equivalent share:

    

Basic

   $ (0.20 )   $ 0.24

Diluted

     (0.20 )     0.23

Weighted average number of common shares outstanding:

    

Basic

     117,040       118,384

Diluted

     117,040       119,860

Balance Sheet Data

        

As of

June 30, 2007

           (In thousands)

Working Capital

     $ 284,573

Total Assets

     $ 7,905,205

Long-term Debt

     $ 2,125,109

Stockholder’s Equity

     $ 4,335,284

 

 

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Equivalent and Comparative Per Share Information

We present below per common share data regarding the income (loss) and book value of Hologic and Cytyc on both historical and unaudited pro forma condensed combined bases and on a per share equivalent unaudited pro forma condensed combined basis for Cytyc. We have derived the unaudited pro forma condensed combined per share information from the unaudited pro forma condensed combined financial statements presented elsewhere in this joint proxy statement/prospectus. You should read the information below in conjunction with the financial statements and accompanying notes of Hologic that are incorporated by reference into this joint proxy statement/prospectus, with the financial statements and accompanying notes of Cytyc that are presented elsewhere in this joint proxy statement/prospectus under Annex B and with the unaudited pro forma condensed combined information included under the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements.” Actual financial statement information in the future may be materially different from the pro forma financial information presented below.

Hologic Per Share Data:

 

     As of and for
    

Fiscal Year Ended

September 30, 2006

   

Nine Months Ended

June 30, 2007

Basic Net Income (Loss) per Common Share

    

Historical

   $ 0.59     $ 1.17

Pro Forma

     (0.20 )     0.24

Diluted Net Income (Loss) per Common Share

    

Historical

   $ 0.56     $ 1.14

Pro Forma

     (0.20 )     0.23

Cash Dividends

    

Historical

   $ —       $ —  

Pro Forma

     —         —  

Book Value per Common Share

    

Historical

   $ 11.51     $ 12.97

Pro Forma

     —         36.41

Cytyc Per Share Data:

 

     As of and for  
    

Fiscal Year Ended

December 31, 2006

   

Six Months Ended

June 30, 2007

 

Basic Net Income (Loss) per Common Share:

    

Historical

   $ 1.22     $ (0.15 )

Equivalent Pro Forma

     (0.10 )     0.12  

Diluted Net Income (Loss) per Common Share:

    

Historical

   $ 1.16     $ (0.15 )

Equivalent Pro Forma

     (0.10 )     0.12  

Cash Dividends

    

Historical

   $ —       $ —    

Equivalent Pro Forma

     —         —    

Book Value per Common Share

    

Historical

   $ 6.62     $ 6.79  

Equivalent Pro Forma

     —         18.93  

 

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Shares of Hologic common stock and shares of Cytyc common stock are both currently listed and principally traded on the Nasdaq Global Select Market. Hologic common stock is listed for trading under the symbol “HOLX” and Cytyc common stock is listed for trading under the symbol “CYTC.” The following table sets forth, for the periods indicated, the high and low sales prices per share of Hologic common stock and Cytyc common stock as reported on the Nasdaq Global Select Market and its predecessor, the Nasdaq National Market.

Hologic:

 

Fiscal Year Ended September 24, 2005

   High    Low

First Quarter

   $ 14.50    $ 8.89

Second Quarter

     19.42      12.31

Third Quarter

     20.36      14.77

Fourth Quarter

     27.40      18.34

Fiscal Year Ended September 30, 2006

   High    Low

First Quarter

   $ 40.01    $ 34.52

Second Quarter

     55.61      35.26

Third Quarter

     56.71      35.36

Fourth Quarter

     50.70      38.07

Fiscal Year Ended September 29, 2007

   High    Low

First Quarter

   $ 52.34    $ 41.94

Second Quarter

     60.24      45.88

Third Quarter

     63.18      50.96

Fourth Quarter (through September 11, 2007)

     58.32      47.51

Cytyc:

 

Fiscal Year Ended December 31, 2005

   High    Low

First Quarter

   $ 27.78    $ 21.02

Second Quarter

     24.50      19.83

Third Quarter

     27.50      21.26

Fourth Quarter

     29.60      23.76

Fiscal Year Ended December 31, 2006

   High    Low

First Quarter

   $ 30.77    $ 26.64

Second Quarter

     28.34      23.80

Third Quarter

     25.63      22.79

Fourth Quarter

     29.17      22.88

Fiscal Year Ended December 31, 2007

   High    Low

First Quarter

   $ 34.85    $ 27.80

Second Quarter

     44.62      34.02

Third Quarter (through September 11, 2007)

     45.10      39.30

 

 

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The table below sets forth the closing sale prices of Hologic common stock and Cytyc common stock as reported on the Nasdaq Global Select Market, each on May 18, 2007, the last trading day prior to the public announcement of the transaction, and on September 11, 2007. The table also shows the implied value of one share of Cytyc common stock, which was calculated by multiplying the closing price of Hologic common stock on those dates by the exchange ratio of 0.52 and then adding to this amount $16.50 per share for the cash portion of the merger consideration. The market prices of Hologic and Cytyc common stock likely will fluctuate between the date of this joint proxy statement/prospectus and the time of the special meetings and the completion of the merger. No assurance can be given concerning the market prices of Hologic common stock or Cytyc common stock before the completion of the merger or the market price of Hologic common stock after the completion of the merger. The merger consideration is fixed in the merger agreement and will not be adjusted for changes in the market value of the common stock of Hologic or Cytyc. One result of this is that the market value of the Hologic common stock that Cytyc stockholders will receive in the merger may vary significantly from the prices shown in the table below.

 

     Cytyc
Common Stock
   Hologic
Common Stock
   Implied Value
of Cytyc
Common Stock

May 18, 2007

   $ 35.05    $ 57.61    $ 46.46

September 11, 2007

   $ 43.66    $ 53.74    $ 44.44

Cytyc stockholders should obtain current market prices for shares of Hologic common stock and Cytyc common stock in deciding whether to vote for the adoption of the merger agreement and the transactions contemplated thereby, including the merger. Hologic stockholders should obtain current market prices for shares of Hologic and Cytyc common stock in deciding whether to vote for the approval of the amendment to the Hologic charter to increase the number of authorized shares of Hologic common stock and the issuance of Hologic common stock to Cytyc stockholders in the merger.

Dividends

Hologic has never declared or paid cash dividends on its capital stock and does not plan to pay any cash dividends in the foreseeable future. Hologic’s current policy is to retain all of its earnings to finance future growth. In addition, Hologic’s $150 million credit facility with Bank of America N.A., as administrative agent, prohibits it from declaring or paying any cash dividends. The proposed new credit facilities expected to be obtained by Hologic in connection with the merger will also contain restrictions on the payment of dividends following the merger.

Cytyc has never declared nor paid cash dividends on its capital stock and does not expect to pay any cash dividends in the foreseeable future.

 

 

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RISK FACTORS

In addition to the other information included in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” below and the additional risks relating to Cytyc included in Annex B of this joint proxy statement/prospectus under the heading “Information about Cytyc—Risk Factors,” you should carefully consider the following risk factors before deciding whether to vote for the adoption of the merger agreement and the transactions contemplated thereby, including the merger, in the case of Cytyc stockholders, or for the amendment to the Hologic charter or the issuance of shares of Hologic common stock in the merger, in the case of Hologic stockholders. If any of the risks described below, elsewhere in this joint proxy statement/prospectus or in the periodic reports incorporated by reference into this joint proxy statement/prospectus actually occurs, the respective businesses, financial results, financial condition, operating results or stock prices of Hologic, Cytyc or the combined company could be materially adversely affected. See “Where You Can Find More Information,” beginning on page 197 and Annex B, “Information about Cytyc—Risk Factors.”

RISKS RELATED TO THE MERGER

Because the market price of Hologic common stock may fluctuate, and the closing date of the merger is not yet ascertainable, Cytyc stockholders cannot be certain of the precise value of the merger consideration they will receive in the merger.

Upon completion of the merger, each share of Cytyc common stock outstanding immediately prior to the merger will be cancelled and converted into the right to receive merger consideration equal to 0.52 of a share of Hologic common stock and $16.50 in cash. The merger consideration is fixed and will not be adjusted due to any increases or decreases in the price of Hologic common stock or Cytyc common stock. However, the value of Hologic common stock to be received by Cytyc stockholders in the merger will depend upon the market price of a share of Hologic common stock upon the completion of the merger. Therefore, if the price of Hologic common stock declines, Cytyc stockholders will receive less value for their shares upon the completion of the merger than the implied value of the merger consideration calculated on the date the merger agreement was signed or on the date of the Cytyc special meeting.

The merger may not be completed until a period of time after the Hologic special meeting and the Cytyc special meeting, during which time the market value of Hologic common stock and Cytyc common stock will likely fluctuate. Therefore, at the time of their respective special meetings, Hologic and Cytyc stockholders will not know the exact market value of Hologic common stock that will be issued in connection with the merger. The market price of a share of Hologic common stock at the time the merger is completed is likely to be different, and may be lower, than it was at the time the merger agreement was signed and at the time of the special meetings. The closing price of Hologic common stock on the Nasdaq Global Select Market on May 18, 2007 was $57.61 per share. From May 21, 2007 through the date of this joint proxy statement/prospectus, the trading price of Hologic common stock ranged from a high of $58.32 per share to a low of $47.51 per share. For Hologic and Cytyc historical market prices, see “Comparative Per Share Market Price and Dividend Information” beginning on page 24.

Stock price changes may result from a variety of factors, including, but not limited to:

 

   

changes in the business, operations or prospects of Hologic or Cytyc;

 

   

catastrophic events, both natural and man-made;

 

   

governmental, litigation and regulatory developments or considerations;

 

   

quarterly fluctuations in either of the companies’ actual or anticipated operating results;

 

   

announcements of technological innovations;

 

   

new products or product enhancements by either of the companies or their respective competitors;

 

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developments in patents or other intellectual property rights and litigation;

 

   

developments in relationships with either of the companies’ customers and suppliers;

 

   

interest rates;

 

   

general market and economic conditions;

 

   

market assessments as to whether and when the merger will be completed and market assessments of the condition, results or prospects of either company’s business; and

 

   

changes in reimbursement rates.

Stockholders of Hologic and Cytyc are urged to obtain current market prices for Hologic and Cytyc common stock when they consider whether to approve the proposals required to complete the merger at their respective special meetings.

Failure to complete the merger could negatively impact the stock prices and the future business and financial results of Hologic and Cytyc.

If the merger is not completed, the ongoing businesses of Hologic or Cytyc may be adversely affected and Hologic and Cytyc will be subject to several risks, including the following:

 

   

being required, under certain circumstances under the merger agreement, to pay a termination fee of between $50 million and $150 million, in the case of a payment by Cytyc to Hologic, or between $33 million and $100 million, in the case of a payment by Hologic to Cytyc;

 

   

having to pay significant costs relating to the merger, such as legal, accounting, financial advisor and printing fees;

 

   

the attention of management of Hologic and Cytyc will have been diverted to the merger instead of on such company’s own operations and pursuit of other opportunities that could have been beneficial to such company; and

 

   

customer perception may be negatively impacted which could affect the ability of Hologic and Cytyc to compete for, or to win, new and renewal business in the marketplace.

Obtaining required approvals and satisfying closing conditions may delay or prevent completion of the merger or reduce the anticipated benefits of the merger.

Completion of the merger is conditioned upon the receipt of all material governmental authorizations, consents, orders and approvals, including the expiration or termination of the applicable waiting periods under the HSR Act. Hologic and Cytyc intend to pursue all required approvals in accordance with the merger agreement. If the companies do not receive these approvals, or do not receive them on terms that satisfy the conditions set forth in the merger agreement, then neither company will be obligated to complete the merger. On July 2, 2007, the waiting period under the HSR Act expired without a request for additional information.

The governmental agencies from which the companies will seek these approvals have broad discretion in administering the governing regulations. As a condition to approval of the merger, agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the combined company’s business. These requirements, limitations, costs, divestitures or restrictions could jeopardize or delay the completion of the merger or may reduce the anticipated benefits of the merger. Further, no assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the conditions to the completion of the merger are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals.

 

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The combined company may be unable to successfully integrate Hologic’s and Cytyc’s operations or to realize the anticipated cost savings, revenues and other benefits of the merger. As a result, the value of the combined company’s common stock may be adversely affected.

Hologic and Cytyc entered into the merger agreement because each company believes that the merger will be beneficial to each of Hologic, Cytyc and their respective stockholders. Currently, each company operates as an independent public company. Achieving the anticipated benefits of the merger will depend in part upon whether the two companies integrate their businesses in an efficient and effective manner. The companies may not be able to accomplish this integration process smoothly or successfully. The necessity of coordinating geographically separated organizations, systems and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. The companies operate numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance. The integration of certain operations following the merger will require the dedication of significant management resources, which may temporarily distract management’s attention from the day-to-day business of the combined company. Employee uncertainty and lack of focus during the integration process may also disrupt the business of the combined company and result in undesired employee attrition. Any inability of management to successfully integrate the operations of the two companies could have a material adverse effect on the business and results of operations of the combined company. The companies may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of the merger. An inability to realize the full extent of, or any of, the anticipated benefits of the merger, as well as any delays encountered in the integration process, could have an adverse effect on the business and results of operations of the combined company, which may affect the value of the shares of the combined company’s common stock after the completion of the merger.

Due to legal restrictions, Cytyc and Hologic have been able to conduct only limited planning regarding the integration of the two companies following the merger and have not yet determined the exact nature of how the businesses and operations of the two companies will be combined after the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized.

The combined company will incur significant transaction and merger-related costs in connection with the merger.

Hologic and Cytyc expect to incur significant costs associated with combining the operations of the two companies. The substantial majority of the expenses resulting from the merger will be comprised of transaction costs related to the merger, systems consolidation costs, and business integration and employment–related costs. Hologic and Cytyc will also incur transaction fees and costs related to formulating integration plans. Additional unanticipated costs may be incurred in the integration of the two companies’ businesses. Due to legal restrictions, Cytyc and Hologic have been able to conduct only limited planning regarding the integration of the two companies and have not yet been able to formulate detailed integration plans to deliver anticipated synergies. Although Hologic and Cytyc expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow them to offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.

Whether or not the merger is completed, the announcement and pendency of the merger could impact or cause disruptions in Cytyc’s and Hologic’s businesses, which could have an adverse effect on their results of operations and financial condition.

Specifically:

 

   

current and prospective customers and suppliers of Hologic and Cytyc may experience uncertainty associated with the merger, including with respect to current or future business relationships with Hologic, Cytyc or the combined company and may attempt to negotiate changes in existing business

 

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relationships or consider entering into business relationships with parties other than Hologic, Cytyc or the combined company, either before or after completion of the merger;

 

   

Cytyc and Hologic employees may experience uncertainty about their future roles with the combined company, which might adversely affect Cytyc’s and Hologic’s ability to retain and hire key employees;

 

   

if the merger is completed, the accelerated vesting of stock options and other equity-based awards and payment of “change in control” benefits to some members of Cytyc’s and Hologic’s management on completion of the merger could result in increased difficulty or cost in retaining Cytyc’s and Hologic’s officers and employees; and

 

   

the attention of management of each of Cytyc and Hologic may be directed toward the completion of the merger and transaction-related considerations and may be diverted from the day-to-day business operations of their respective companies.

Certain directors and executive officers of Hologic and Cytyc have interests that may be different from, or in addition to, interests of Hologic and Cytyc stockholders generally.

Some directors and executive officers of Hologic and Cytyc may have interests that differ from yours. For example, some directors and executive officers have employment, indemnification and severance arrangements, rights to acceleration of stock options and other equity-based awards, and other benefits they may receive on a change in control of Hologic or Cytyc, as the case may be, that provide them with interests in the merger that may be different from yours. You should be aware of these interests when you consider your board of directors’ recommendation that you vote in favor of the proposals submitted at your stockholder meeting.

The deal-protection provisions of the merger agreement may deter alternative business combinations and could negatively impact the stock prices of Hologic and Cytyc if the merger agreement is terminated.

As a result of certain provisions of the merger agreement, it is possible that a third party who might be interested in pursuing a business combination proposal with Hologic or Cytyc would be discouraged from doing so. Any such proposal might be advantageous to the stockholders of Hologic and Cytyc when compared to the terms and conditions of the transaction described in this joint proxy statement/prospectus. In particular, the termination fee provision of the merger agreement may deter third parties from proposing alternative business combinations that might result in greater value to Hologic and Cytyc stockholders than the merger. In addition, in the event the merger agreement is terminated by Hologic or Cytyc in circumstances that obligate either party to pay a termination fee to the other party, Hologic’s or Cytyc’s stock price may decline as a result of its payment of the termination fee.

The merger is expected to have a dilutive effect on Hologic’s earnings per share calculated in accordance with U.S. GAAP, which may adversely affect the market price of Hologic’s common stock following the merger.

The merger is expected to have a dilutive effect on earnings per share of Hologic calculated in accordance with U.S. GAAP primarily due to the amortization of the intangible assets in connection with the merger. These expectations are based on preliminary estimates which may materially change after the completion of the merger. The combined company could also encounter additional transaction and integration-related costs or other factors such as the failure to realize all of the benefits anticipated in the merger. All of these factors could cause further dilution to the earnings per share of the combined company or cause a decrease in the price of common stock of the combined company.

 

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Charges to earnings resulting from the application of the purchase method of accounting may adversely affect the market value of the combined company’s common stock following the merger.

In accordance with U.S. GAAP, Hologic will be considered the acquirer of Cytyc for accounting purposes. Hologic will account for the merger using the purchase method of accounting, which will result in charges to the combined company’s earnings that could adversely affect the market value of Hologic’s common stock following the completion of the merger. Under the purchase method of accounting, Hologic will allocate the total purchase price to the assets acquired and liabilities assumed from Cytyc based on their fair values as of the date of the effective time of the merger, and record any excess of the purchase price over those fair values as goodwill. For certain tangible and intangible assets, recording their fair values as of the completion date of the merger will result in the combined company incurring significant additional depreciation and/or amortization expense that exceed the combined amounts recorded by Hologic and Cytyc prior to the merger. This increased expense will be recorded by the combined company over the useful lives of the underlying assets. In addition, to the extent the value of goodwill or intangible assets were to become impaired, the combined company may be required to incur charges relating to the impairment of those assets.

RISKS RELATED TO INDEBTEDNESS OF THE COMBINED COMPANY

Hologic will incur significant indebtedness in order to finance the merger, which will limit the combined company’s operating flexibility, and could adversely affect the combined company’s operations and financial results and prevent the combined company from fulfilling its obligations.

In order to finance the cash portion of the merger consideration and other expenses incurred in connection with the merger, Hologic intends to incur up to approximately $2.55 billion of new indebtedness, including approximately $250 million under a five year senior secured tranche A term loan facility, $850 million under a 5.5 year senior secured tranche B term loan facility, approximately $1.25 billion under an 18 month senior secured capital markets term loan facility and up to $200 million of additional indebtedness under its proposed new five year revolving credit facility. Additionally, certain other of Hologic’s and Cytyc’s current indebtedness may remain outstanding. These new credit facilities are anticipated to bear interest at variable rates to be determined. This level of indebtedness may:

 

   

make it more difficult for the combined company to satisfy its obligations with respect to its outstanding indebtedness;

 

   

increase the combined company’s vulnerability to general adverse economic and industry conditions, including increases in interest rates;

 

   

require the combined company to dedicate a substantial portion of its cash flow from operations to interest and principal payments on its indebtedness, which would reduce the availability of its cash flow to fund working capital, capital expenditures, expansion efforts and other general corporate purposes;

 

   

limit the combined company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates;

 

   

place the combined company at a competitive disadvantage compared to its competitors that have less debt; and

 

   

limit the combined company’s ability to borrow additional funds for working capital, capital expenditures, general corporate purposes or acquisitions.

In addition, the terms of the financing obligations to be incurred by the combined company in connection with the merger will contain covenants that restrict the combined company’s ability, and that of its subsidiaries, to engage in certain transactions and may impair the combined company’s ability to respond to changing business and economic conditions, including, among other things, limitations on the ability to:

 

   

incur additional indebtedness;

 

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pay dividends and make distributions;

 

   

repurchase stock;

 

   

make certain investments;

 

   

create liens;

 

   

engage in transactions with affiliates;

 

   

merge with or acquire another company; and

 

   

transfer and sell assets.

The combined company’s proposed new credit facilities are also anticipated to require the combined company to satisfy certain financial covenants.

The combined company’s ability to comply with these provisions may be affected by general economic conditions, political decisions, industry conditions and other events beyond the combined company’s control. The combined company’s failure to comply with the covenants contained in the proposed new credit facilities, including financial covenants, could result in an event of default, which could materially and adversely affect the combined company’s results of operation and financial condition.

If there were an event of default under one of the combined company’s debt instruments or a change of control of the combined company, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately and may be cross-defaulted to other debt. The combined company’s assets or cash flow may not be sufficient to fully repay borrowings under its outstanding debt instruments if accelerated upon an event of default, and there is no guarantee that the combined company would be able to repay, refinance or restructure the payments on those debt securities.

See “The Merger—Financing of the Merger” beginning on page 59.

The combined company may not be able to generate sufficient cash flow to service all of its obligations, including its obligations under its new credit facilities.

The combined company’s ability to make payments on and to refinance its indebtedness, including the indebtedness incurred under the proposed new credit facilities, and to fund planned capital expenditures, strategic transactions and expansion efforts will depend on the combined company’s ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the control of the combined company.

The combined company’s business may not be able to generate sufficient cash flow from operations, and the combined company cannot assure that future borrowings will be available to it in amounts sufficient to enable it to pay its indebtedness as such indebtedness matures and to fund its other liquidity needs. If this is the case, the combined company will need to refinance all or a portion of its indebtedness on or before maturity, and there can be no assurance that it will be able to refinance any of its indebtedness, including its new credit facilities, on commercially reasonable terms, or at all. The combined company may need to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing. These financing strategies may not be affected on satisfactory terms, if at all. The combined company’s ability to refinance its indebtedness or obtain additional financing, or to do so on commercially reasonable terms, will depend on, among other things, its financial condition at the time, restrictions in agreements governing its indebtedness, and other factors, including the condition of the financial markets and the markets in which the combined company will compete.

 

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If the combined company does not generate sufficient cash flow from operations, and additional borrowings, refinancings or proceeds of asset sales are not available to it, the combined company may not have sufficient cash to enable it to meet all of its obligations.

The combined company may not be able to effect its plans for a refinancing of a substantial portion of its new credit facilities with convertible debt or other equity or equity-linked financing, which could adversely affect the combined company’s liquidity and results of operations, and, even if completed, such refinancing could result in substantial dilution to existing stockholders of the combined company.

As soon as practicable after the effective time of the merger, Hologic intends to cause the combined company to refinance a substantial portion of the debt incurred under the proposed new credit facilities with convertible debt or other equity or equity-linked financing, with reduced interest rates, extended maturity and limited or no restrictive or other financial covenants. The combined company’s ability to effect this refinancing on commercially reasonable terms will depend on, among other things, its financial condition at the time and other factors, including the condition of the financial markets and the markets in which the combined company will compete. The combined company cannot assure that it will be able to effect this refinancing on a timely basis or on favorable terms, if at all, or that such financing will not result in significant dilution to existing stockholders. Failure of the combined company to effect timely such a refinancing would likely result in an increase in the ongoing interest expense and restrictive covenants, and could otherwise adversely effect the combined company’s liquidity and results of operations.

The combined company will be required to enter into hedging transactions for its variable interest rate exposure under its proposed new credit facilities which could adversely affect its ability to repay all or a portion of those facilities without incurring additional costs, and will subject the combined company to risks of default by the counterparties to those transactions.

The terms of the combined company’s proposed new credit facility will obligate the combined company to enter into hedging transactions to hedge a substantial portion of the interest rate risk under those facilities. If the combined company repays, redeems or repurchases (voluntarily or mandatorily) all or a portion of its new credit facilities prior to their scheduled maturities, the combined company’s obligations under those hedging transactions may cease to match the combined company’s obligations under the credit facilities, and could result in significant additional expense to the combined company. These hedging transactions may not qualify for effective hedge treatment in accordance with U.S. GAAP and as a result, any changes in fair value of hedge contracts could be required to be recorded to the statement of income. In addition, default by the counterparties to the combined company’s hedging transactions could result in the combined company having to make interest payments at the variable rates payable under the new credit facilities and expose the combined company further to interest rate fluctuation risk under those credit facilities.

RISKS RELATED TO HOLOGIC, CYTYC AND COMBINED COMPANY

Sales and market acceptance of the combined company’s products will be dependent on third party reimbursement. Failure of third party payors to provide appropriate levels of reimbursement for use of the combined company’s products could harm the combined company’s business and prospects.

Sales and market acceptance of the combined company’s medical products in the United States and other countries will be dependent on the reimbursement of patient’s medical expenses by government healthcare programs and private health insurers. The costs of Hologic’s and Cytyc’s products to customers are substantial, and market acceptance of the combined company’s products will continue to depend upon their customers’ ability to obtain an appropriate level of reimbursement from third-party payors for use of their products. In the United States, the Centers for Medicare & Medicaid Services, known as CMS, establish guidelines for the reimbursement of healthcare providers treating Medicare and Medicaid patients. Under current CMS guidelines, varying reimbursement levels have been established for Hologic’s and Cytyc’s products and procedures.

 

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The actual reimbursement amounts are determined by individual state Medicare carriers and, for non-Medicare and Medicaid patients, private insurance carriers. There are often delays between the reimbursement approvals by CMS and by a state Medicare carrier and private insurance carriers. Moreover, states as well as private insurance carriers may choose not to follow the CMS reimbursement guidelines. The use of the combined company’s products outside the United States will be similarly affected by reimbursement policies adopted by foreign governments’ reimbursements and regulatory positions and insurance carriers.

In November 2006, the CMS announced reductions to the 2007 reimbursement levels for bone density assessments, CAD and breast biopsy. The most significant reductions applicable to the combined company’s products were an approximately 40% decline in 2007 in reimbursement for osteoporosis (DXA) testing, which increases to an approximately 70% decline over four years, an approximately 30% decline in 2007 in reimbursement for stereotactic biopsy, which increases to an approximately 63% decline over four years, and an approximately 16% decline in reimbursement for CAD in 2007, which increases to an approximately 50% decline over four years. These reductions or any other reduction or adverse change in reimbursement policies for the use of the combined company’s products could harm the combined company’s business and prospects.

The combined company’s business may be harmed by Hologic’s and Cytyc’s recently completed acquisitions.

Hologic and Cytyc have recently acquired a number of businesses, technologies, product lines, and products, including Suros Surgical Systems, Inc., R2 Technology, Inc. and AEG Elektrofotografie GmbH, in the case of Hologic, and Adeza Biomedical Corporation and Adiana, Inc., in the case of Cytyc. In addition, Hologic has recently entered into an agreement to acquire BioLucent, Inc. The success of these acquisitions will depend on the combined company’s ability to realize the anticipated benefits from combining the acquired businesses with the combined company’s business. The combined company may fail to realize these anticipated benefits for a number of reasons, including the following:

 

   

problems may arise with the combined company’s ability to successfully integrate the acquired businesses, which may result in the combined company not operating as effectively and efficiently as expected, and may include:

 

   

diversion of management time, as well as a shift of focus from operating the businesses to issues related to integration and administration or inadequate management resources available for integration activity and oversight;

 

   

failure to retain and motivate key employees;

 

   

failure to successfully manage relationships with customers, distributors and suppliers;

 

   

failure of customers to accept new products;

 

   

failure to effectively coordinate sales and marketing efforts;

 

   

failure to combine product offerings and product lines quickly and effectively;

 

   

failure to effectively enhance acquired technology and products or develop new products relating to the acquired businesses;

 

   

potential difficulties and inefficiencies in managing and operating businesses in multiple locations or operating businesses in which the combined company has either limited or no direct experience;

 

   

potential difficulties integrating financial reporting systems;

 

   

potential difficulties in the timely filing of required reports with the SEC; and

 

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potential difficulties in implementing controls, procedures and policies, including disclosure controls and procedures and internal controls over financial reporting, appropriate for a larger public company at companies that, prior to the acquisition of such companies, had lacked such controls, procedures and policies, which may result in ineffective disclosure controls and procedures or material weaknesses in internal controls over financial reporting;

 

   

the combined company may not be able to achieve the expected synergies from an acquisition or it may take longer than expected to achieve those synergies;

 

   

an acquisition may result in future impairment charges related to diminished fair value of businesses acquired as compared to the price Hologic or Cytyc paid for them;

 

   

an acquisition may involve restructuring operations or reductions in workforce which may result in substantial charges to the combined company’s operations;

 

   

an acquisition may involve unexpected costs or liabilities, or the effects of purchase accounting may be different from the combined company’s expectations; and

 

   

the acquired businesses may be adversely affected by future legislative, regulatory, or tax decisions and/or changes as well as other economic, business and/or competitive factors.

Hologic’s acquisition of AEG Elektrofotografie, which conducts its business worldwide, with headquarters in Germany and manufacturing operations in Germany and China, is also subject to the additional challenges and risks associated with volatility in the market for organic photoconductor coatings used for laser printer cartridges, and the combined company’s international operations, including those related to integration of operations across different cultures and languages, currency risk and the particular economic, legal, political and regulatory risks associated with specific countries. Failure of the combined company to realize the anticipated benefits from combining the acquired businesses could harm the combined company’s business and prospects and adversely affect the market price of the combined company’s common stock.

The market for Hologic’s direct-to-digital full-field mammography products is relatively new and may not develop as expected.

The markets for Hologic’s direct-to-digital full-field mammography products may not continue to develop as expected. There is a significant installed base of conventional screen-film mammography products in hospitals and radiological practices. The use of Hologic’s direct-to-digital mammography products in many cases would require these potential customers to either modify or replace their existing x-ray imaging equipment. Moreover, as direct-to-digital mammography products are generally more expensive than conventional screen-film mammography products, Hologic believes that a major factor in the market’s acceptance of direct-to-digital mammography products has been and will continue to be based upon the benefits of direct-to-digital technology as compared to less expensive technologies. As a result, the market for Hologic’s direct-to-digital mammography products has and will continue to be affected by published studies and reports relating to the comparative efficacy of digital mammography products. The publication of an adverse study could significantly impair the adoption of this technology and harm the combined company’s business. The implementation of digital mammography technology is also affected by the trend toward transition by the healthcare industry from conventional film archiving systems to hospital Picture Archiving and Communications Systems, known as PACS, to store x-ray images electronically. Because the benefits of Hologic’s direct-to-digital mammography technology may not be fully realized by customers until they install a PACS platform, a large potential market for these products may not develop until PACS environments are more widely used. Because the markets for these products are relatively new, it is likely that the combined company’s evaluation of the potential markets for these products will materially vary with time.

 

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Current levels of growth in the market for endometrial ablation procedures, such as Cytyc’s NovaSure System, for the treatment of excessive menstrual bleeding may not be indicative of future growth.

Demand for newly introduced technologies or treatments can initially be exaggerated as supply increases to meet pre-existing demand. However, once the pre-existing demand is met, growth in the market may abruptly stop or significantly slow. Some of the current growth in the market for new endometrial ablation procedures may be the result of a considerable pre-existing unmet demand for products of this nature. Cytyc cannot predict when, or at what rate, this demand may stop or decline in growth. Cytyc cannot assure you that it will be successful in continuing to attract physicians and women to use the NovaSure System, or whether or not evolving trends in the treatment of excessive menstrual bleeding will favor new endometrial ablation procedures as compared to traditional approaches. If the demand for treatments like the NovaSure System were to stop abruptly or begin to decline, the combined company’s operating results and profitability could be adversely affected.

The success of Cytyc’s ThinPrep System depends upon the cost and continued market acceptance of Cytyc’s ThinPrep System products.

The success of Cytyc’s ThinPrep System depends on the continued market acceptance of its ThinPrep System and ThinPrep Imaging System, including any follow-on applications of ThinPrep technology. The laboratory cost of using the ThinPrep System and ThinPrep Imaging System for cervical cancer screening, both together and individually, is higher than that of a conventional Pap smear and, Cytyc believes, competing liquid-based slide preparation systems. Due in part to increased competitive pressures in the cytology screening market and healthcare industry to reduce costs, the combined company’s ability to continue gaining market acceptance of the ThinPrep System and follow-on products will depend on its ability to demonstrate that the higher cost of using the ThinPrep System is offset by (i) a reduction in costs often associated with conventional Pap smears or competing liquid-based slide preparation systems, such as inaccurate diagnoses and the need for repeat Pap smears, as well as (ii) the ability to conduct additional testing, such as testing for the HPV, Chlamydia trachomatis and Neisseria gonorrhea on samples collected in a ThinPrep vial of preservative. In particular, for the ThinPrep Imaging System, the combined company will need to work with healthcare providers, insurance companies and other third-party payors, and clinical laboratories to reinforce the known clinical efficacy and cost-effectiveness of the ThinPrep Imaging System.

Cytyc is dependent upon a relatively small number of large clinical laboratory customers in the United States for a significant portion of its sales of the ThinPrep System.

Cytyc is dependent upon a relatively small number of large clinical laboratory customers in the United States for a significant portion of its sales of the ThinPrep System. The business and prospects of the combined company may be harmed if the combined company is unable to increase sales to, or maintain pricing levels with Cytyc’s existing customers and establish new customers both within and outside the United States. Due in part to a trend toward consolidation of clinical laboratories in recent years and the relative size of the largest United States laboratories, it is likely that a significant portion of ThinPrep System sales will continue to be concentrated among a relatively small number of large clinical laboratories.

The combined company’s success will depend on new product development.

Each of Hologic and Cytyc has continuing research and development programs designed to develop new products and to enhance and improve its products. Hologic is expending significant resources on the development of digital x-ray imaging products, including the development of a digital mammography product to perform breast tomosynthesis, a 3-dimensional imaging technique. Cytyc is expending significant resources on continued product line enhancements. The successful development of the combined company’s products and product enhancements is subject to numerous risks, both known and unknown, including:

 

   

unanticipated delays;

 

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access to capital;

 

   

budget overruns;

 

   

technical problems; and

 

   

other difficulties that could result in the abandonment or substantial change in the design, development and commercialization of these new products, including, for example, changes requested by the FDA in connection with pre-market approval applications for products or 510(k) notification.

Given the uncertainties inherent with product development and introduction, there can be no assurance that any of the combined company’s product development efforts will be successful on a timely basis or within budget, if at all. The failure of the combined company to develop new products and product enhancements, such as Hologic’s digital mammography tomosynthesis product, on a timely basis or within budget could harm the combined company’s business and prospects and could adversely affect the market price of the combined company’s common stock.

The markets for and future growth of the combined company’s products and treatments may not develop as expected.

There can be no assurance that the combined company’s existing products or treatments, or the enhancement of products or treatments will be commercially successful. The successful commercialization of the combined company’s products and treatments are subject to numerous risks, both known and unknown, including:

 

   

uncertainty of the development of a market for such product or treatment;

 

   

trends relating to, or the introduction or existence of, competing products, technologies or alternative treatments or therapies that may be more effective, safer or easier to use than the combined company’s products, technologies, treatments or therapies;

 

   

perceptions of the combined company’s products or treatments as compared to other products and treatments;

 

   

recommendation and support for the use of the combined company’s products or treatments by influential customers, such as hospitals, radiological practices, breast surgeons and radiation oncologists and treatment centers;

 

   

the availability and extent of data demonstrating the clinical efficacy of the combined company’s products or treatments;

 

   

competition, including the presence of competing products sold by companies with longer operating histories, more recognizable names and more established distribution networks; and

 

   

other technological developments.

Often, the development of a significant market for a product or treatment will depend upon the establishment of a reimbursement code or an advantageous reimbursement level for use of the product or treatment. Moreover, even if addressed, such reimbursement codes or levels frequently are not addressed until after a product or treatment is developed and commercially introduced, which can delay the successful commercialization of a product or treatment. If the combined company is unable to successfully commercialize and create a significant market for its products and treatments, such as Hologic’s digital mammography tomosynthesis product, due to, among other things, the lack of reimbursement codes or disadvantageous reimbursement levels for such products or treatments, the combined company’s business and prospects could be harmed and the market price of the combined company’s common stock could be adversely affected.

 

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The combined company may not be successful in growing its international sales, which could have a material adverse effect on its business and financial condition.

The combined company cannot guarantee that it will successfully continue to develop international sales channels or capabilities that will enable it to generate significant revenue from international sales. The combined company may not be able to obtain favorable third-party reimbursements and required regulatory approvals in foreign countries. Failure to continue to increase international sales could harm the business and prospects of the combined company.

The combined company’s success depends on its ability to manage growth effectively.

The operations and facilities, including the number of employees and the geographic area of operations, of Hologic and Cytyc have grown rapidly, and the combined company’s operations and facilities are expected to continue to grow. The failure of the combined company to manage growth effectively could harm the business and prospects of the combined company. The growth of the combined company may significantly strain the combined company’s managerial, operational and financial resources and systems. To manage the combined company’s growth effectively, it is expected that the combined company will continue to implement and improve additional management and financial systems and controls, and to effectively retain, expand, train and manage its employee base.

The business of the combined company could be harmed if it infringes upon the intellectual property rights of others.

There has been substantial litigation regarding patent and other intellectual property rights in the medical device and related industries. Hologic and Cytyc have each been involved in infringement litigation, and may in the future be notified that the combined company may be infringing intellectual property rights possessed by third parties.

For example, in March 2005, Hologic was served with a complaint alleging that Hologic’s HTC grid infringes U.S. Patent Number 5,970,118. The plaintiff sought to preliminarily and permanently enjoin Hologic from infringing the patent, as well as damages resulting from the alleged infringement, treble damages and reasonable attorney fees, and such other and further relief as may be available. In March 2007, the court granted Hologic’s motion for summary judgment and dismissed the complaint with prejudice. The plaintiff has a right to appeal the matter after conclusion of the case as a whole.

On June 16, 2003, Cytyc filed a suit for Declaratory Judgment in United States District Court for the District of Massachusetts asking the court to determine and declare that certain of TriPath Imaging, Inc.’s patents are invalid and not infringed by Cytyc’s ThinPrep Imaging System. On June 17, 2003, TriPath announced that it had filed a lawsuit against Cytyc in the United States District Court for the Middle District of North Carolina alleging patent infringement, false advertising, defamation, intentional interference, unfair competition, and unfair and deceptive trade practices. In its complaint TriPath sought the issuance of a preliminary and permanent injunction enjoining Cytyc from infringing the asserted patents and to award unspecified damages, unspecified treble damages and attorneys’ fees, and the impounding and destruction of the alleged infringing products. As to the non-patent claims, TriPath sought unspecified damages, punitive damages and attorneys’ fees. The non-patent claims have been dismissed and the patent cases have since been consolidated into a single action. On August 22, 2007 the judge issued rulings on summary judgment motions filed by both Cytyc and TriPath. As a result, two of the four asserted patents were determined to be either invalid or not infringed by Cytyc and the remaining two patents were found to have questions of fact for resolution at trial. The Court has scheduled a trial start date of October 29, 2007. See Annex B under “Information about Cytyc—Legal Proceedings.”

In connection with litigation or if any claims are asserted against the combined company’s intellectual property rights, the combined company may seek to enter into royalty or licensing arrangements. There is a risk in these situations that no license will be available or that a license will not be available on reasonable terms.

 

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Alternatively, the combined company may decide to litigate such claims or to design around the patented technology. These actions could be costly and would divert the efforts and attention of the combined company’s management and technical personnel. As a result, any infringement claims by third parties or claims for indemnification by customers resulting from infringement claims, whether or not proven to be true, may harm the combined company’s business and prospects.

If Hologic fails to achieve and maintain the high manufacturing standards that Hologic’s direct radiography products require, the combined company may not be successful in developing and marketing those products.

The manufacture of Hologic’s direct radiography detectors is highly complex and requires precise high quality manufacturing that is difficult to achieve. Hologic has in the past and the combined company may in the future experience difficulties in manufacturing these detectors in commercial quantities, primarily related to delays and difficulties in obtaining critical components for these detectors that meet Hologic’s high manufacturing standards. Hologic’s initial difficulties led to increased delivery lead-times and increased costs of manufacturing these products. The combined company’s failure, including the failure of its contract manufacturers, to achieve and maintain the required high manufacturing standards could result in further delays or failures in product testing or delivery, cost overruns, product recalls or withdrawals, or other problems that could harm the combined company’s business and prospects.

Interruptions, delays, shutdowns or damage at the combined company’s manufacturing facilities could harm its business.

Hologic manufactures most of its products at its manufacturing facilities in Danbury, Connecticut, Bedford, Massachusetts, Indianapolis, Indiana and Newark, Delaware. In addition, Hologic manufactures the selenium coatings used in the digital x-ray image capture radiographic systems in Germany and its selenium and organic photoconductor coatings for other uses in Germany and China. Cytyc assembles and manufactures its ThinPrep products at its facilities in Marlborough, Massachusetts and Londonderry, New Hampshire. In addition, Cytyc manufactures its NovaSure System and MammoSite System in Costa Rica. An interruption in manufacturing capabilities at any of these facilities, as a result of equipment failure or other reasons, could reduce, delay or prevent the production of the combined company’s products. The manufacturing facilities of the combined company will be subject to the risk of catastrophic loss due to unanticipated events, such as fires, earthquakes, explosions, floods or weather conditions. The combined company’s manufacturing facilities may experience plant shutdowns, strikes or other labor disruptions, or periods of reduced production as a result of equipment failures, loss of power, gray outs, delays in deliveries or extensive damage to any of its facilities, which could harm the business and prospects of the combined company. Because some of the combined company’s manufacturing operations will be located in Germany, China and Costa Rica, those manufacturing operations will also be subject to additional challenges and risks associated with international operations described below.

The uncertainty of healthcare reform could harm the combined company’s business and prospects.

In recent years, the healthcare industry has undergone significant change driven by various efforts to reduce costs, including efforts at national healthcare reform, trends toward managed care, cuts in Medicare, consolidation of healthcare distribution companies and collective purchasing arrangements by office-based healthcare practitioners. Healthcare reform proposals and medical cost containment measures in the United States and in many foreign countries could:

 

   

limit the use of the combined company’s products;

 

   

reduce reimbursement available for such use; or

 

   

adversely affect the use of new therapies for which the combined company’s products may be targeted.

 

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These reforms or cost containment measures, including the uncertainty in the medical community regarding their nature and effect, could harm the combined company’s business and prospects.

The combined company’s business could be harmed if products contain undetected errors or defects or do not meet customer specifications.

Hologic and Cytyc are continuously developing new products and improving their existing products. Newly introduced products can contain undetected errors or defects. In addition, these products may not meet their performance specifications under all conditions or for all applications. If, despite internal testing and testing by customers, any of the combined company’s products contain errors or defects or fail to meet customer specifications, then the combined company may be required to enhance or improve those products or technologies. The combined company may not be able to do so on a timely basis, if at all, and may only be able to do so at considerable expense. In addition, any significant reliability problems could result in adverse customer reaction, negative publicity or legal claims and could harm the combined company’s business and prospects.

The combined company will rely on one or only a limited number of suppliers for some key components or subassemblies for its products, which could harm the combined company’s business and prospects.

Hologic and Cytyc each rely on one or only a limited number of suppliers for some key components or subassemblies for their products. In particular, Hologic has a limited number of suppliers for the panel for its direct radiography products and AEG, one of Hologic’s subsidiaries, is Hologic’s sole source provider for Selenium coatings. In addition, Hologic has only limited sources of supply for some key components used in its mini C-arm systems and its Suros biopsy systems. Cytyc currently obtains certain key components of its products, including the proprietary filter material and microscope slides used in the ThinPrep Pap Test, radioisotopes, certain balloons and other items used in the design and manufacture of the MammoSite System and the Iotrex liquid isotope used with the GliaSite System, from single or a limited number of sources due to technology, availability, price, quality and other considerations. Additionally, the NovaSure System utilizes several components that may become obsolete or no longer be manufactured.

Obtaining alternative sources of supply of these components could involve significant delays and other costs and regulatory challenges, and may not be available to the combined company on reasonable terms, if at all. The failure of a component supplier or contract assembler to provide sufficient quantities, acceptable quality and timely components or assembly service at an acceptable price, or an interruption of supplies from such a supplier could harm the business and prospects of the combined company. Any disruption of supplies of key components could delay or reduce shipments, which could result in lost or deferred sales for the combined company.

The combined company will face intense competition from other companies and may not be able to compete successfully.

A number of companies have developed, or are expected to develop, products that compete or will compete with the combined company’s products. Some of combined company’s competitors will be large companies that may enjoy significant competitive advantages over the combined company, including:

 

   

significantly greater name recognition;

 

   

established distribution networks;

 

   

additional lines of products, and the ability to offer rebates or bundle products to offer discounts or incentives to gain competitive advantage;

 

   

more extensive research, development, sales, marketing and manufacturing capabilities; and

 

   

better positioning to continue to improve their technology in order to compete in an evolving industry.

 

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The markets in which the combined company will sell in are intensely competitive, subject to rapid change and may be significantly affected by new product introductions and other market activities of industry participants. Other companies may develop products that are superior to or less expensive, or both, than the combined company’s products. Improvements in existing competitive products or the introductions of new competitive products may reduce the combined company’s ability to compete for sales, particularly if those competitive products demonstrate better safety or effectiveness, clinical results, ease of use or lower costs.

If the combined company is unable to compete effectively against existing and future competitors and existing and future alternative treatments, the business and prospects of the combined company could be harmed.

The combined company’s success will depend upon its ability to adapt to rapid changes in technology and customer requirements.

The markets for Hologic’s and Cytyc’s products have been characterized by rapid technological change, frequent product introductions and evolving customer requirements. These trends will likely continue into the foreseeable future. The combined company’s success will depend, in part, upon its ability to enhance the existing products of Hologic and Cytyc, successfully develop new products that meet increasing customer requirements and gain market acceptance. If the combined company fails to do so its products may be rendered obsolete or uncompetitive by new industry standards or changing technology.

The combined company’s results of operations will be subject to significant quarterly variation and seasonal fluctuation.

Hologic’s and Cytyc’s results of operations have been and may continue to be subject to significant quarterly variation. The combined company’s results for a particular quarter may also vary due to a number of factors, including:

 

   

the overall state of healthcare and cost containment efforts;

 

   

the timing and level of reimbursement for the combined company’s products domestically and internationally;

 

   

the development status and demand for the combined company’s products;

 

   

the development status and demand for therapies to treat breast cancer and osteoporosis;

 

   

economic conditions in the combined company’s markets;

 

   

foreign exchange rates;

 

   

the timing of orders;

 

   

the timing of expenditures in anticipation of future sales;

 

   

the mix of products the combined company sells;

 

   

the introduction of new products and product enhancements by the combined company or its competitors;

 

   

pricing and other competitive conditions; and

 

   

unanticipated expenses.

Customers may also cancel or reschedule shipments. Production difficulties could also delay shipments. Any of these factors also could harm the combined company’s business and prospects.

 

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The combined company’s delay or inability to obtain any necessary United States or foreign regulatory clearances or approvals for its products could harm the combined company’s business and prospects.

Hologic’s and Cytyc’s products are, and the combined company’s products will be, medical devices that are the subject of a high level of regulatory oversight. The combined company’s delay or inability to obtain any necessary United States or foreign regulatory clearances or approvals for its products, such as Hologic’s digital mammography tomosynthesis product, could harm its business and prospects and could adversely affect the market price of the combined company’s common stock. The process of obtaining clearances and approvals can be costly and time-consuming. There is a risk that any approvals or clearances, once obtained, may be withdrawn or modified.

Medical devices cannot be marketed in the United States without clearance or approval by the FDA. Any modifications to a device that has received a pre-market approval that affect its safety or effectiveness require a pre-market approval supplement or possibly a separate pre-market approval, either of which is likely to be time-consuming, expensive and uncertain to obtain. If the FDA requires the combined company to seek one or more pre-market approval supplements or new pre-market approvals for any modification to a previously approved device, the combined company may be required to cease marketing or to recall the modified device until it obtains approval, and the combined company may be subject to significant criminal and/or civic sanctions, including but not limited to, regulatory fines or penalties.

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 and labeling. States may also regulate the manufacture, sale and use of medical devices, particularly those that employ x-ray technology. The combined company’s products will also be subject to approval and regulation by foreign regulatory and safety agencies.

Recent proposed changes to reclassify full-field digital mammography to permit 510(k) clearance could increase competition for Hologic’s digital mammography products.

On May 23, 2006 the FDA Radiological Devices Panel recommended the reclassification of full-field digital mammography systems from Class III to Class II devices. The FDA has not taken any additional steps to act on the panel’s recommendation. If the FDA implements the panel’s recommendation, the reclassification would allow full-field digital mammography systems to be cleared for commercialization through the 510(k) process, which is less rigorous than the present pre-market approval process. If and when implemented, the reclassification for full-field digital mammography systems from Class III to Class II devices may lower barriers of entry into the digital mammography market, may result in more competitors entering the United States market and could harm sales of Hologic’s digital mammography systems.

The combined company’s products may be subject to recalls even after receiving FDA clearance or approval, which could harm the combined company’s business and prospects.

The FDA and similar governmental bodies in other countries have the authority to require the recall of medical products in the event of material deficiencies or defects in design or manufacture. A government mandated or voluntary recall by the combined company could occur as a result of component failures, manufacturing errors or design defects, including defects in labeling. Any recall could harm the reputation of the combined company’s products and adversely affect the combined company’s business and prospects.

Some of the combined company’s activities may subject the combined company to risks under federal and state laws prohibiting “kickbacks” and false or fraudulent claims.

Hologic and Cytyc are, and the combined company will be, subject to the provisions of a federal law commonly known as the Medicare/Medicaid anti-kickback law, and several similar state laws, which prohibit

 

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payments intended to induce physicians or others either to refer patients or to acquire or arrange for or recommend the acquisition of healthcare products or services. While the federal law applies only to referrals, products or services for which payment may be made by a federal healthcare program, state laws often apply regardless of whether federal funds may be involved. These laws constrain the sales, marketing and other promotional activities of manufacturers of medical devices by limiting the kinds of financial arrangements, including sales programs, with hospitals, physicians, laboratories and other potential purchasers of medical devices. Other federal and state laws generally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, or are for items or services that were not provided as claimed. Anti-kickback and false claims laws prescribe civil and criminal penalties (including fines) for noncompliance that can be substantial. While Hologic and Cytyc continually strive, and the combined company will strive, to comply with these complex requirements, interpretations of the applicability of these laws to marketing practices is ever evolving and even an unsuccessful challenge could cause adverse publicity and be costly to respond to, and thus could harm the business and prospects of the combined company.

The combined company is subject to the risk of product liability claims relating to its products.

Hologic’s and Cytyc’s businesses involve, and the combined company’s business will involve, the risk of product liability and other claims inherent to the medical device business. If even one of the combined company’s products is found to have caused or contributed to injuries or deaths, the combined company could be held liable for substantial damages. Hologic and Cytyc maintain, and the combined company will maintain, product liability insurance subject to deductibles and exclusions. There is a risk that the insurance coverage will not be sufficient to protect the combined company from product and other liability claims, or that product liability insurance will not be available to the combined company at a reasonable cost, if at all. An under-insured or uninsured claim could harm the business and prospects of the combined company. In addition, claims could adversely affect the reputation of the related product, which could damage that product’s competitive position in the market.

The sale and use of one of the combined company’s diagnostic products could also lead to the filing of product liability claims if someone were to allege that one of the combined company’s products contained a design or manufacturing defect that resulted in the failure to detect a disorder for which it was being used to screen or caused injuries to a patient. Any product liability claim brought against the combined company, with or without merit, could result in the increase of the combined company’s product liability insurance rates or the inability to secure additional coverage in the future. Also, even a meritless or unsuccessful product liability claim could be time consuming and expensive to defend, which could result in a diversion of management’s attention from the combined company’s business and could adversely affect the perceived safety and efficacy of the combined company’s products, and could harm the business and prospects of the combined company.

The combined company will use hazardous materials and products.

Hologic’s and Cytyc’s research and development involves, and the combined company’s research and development will involve, the controlled use of hazardous materials, such as toxic and carcinogenic chemicals and various radioactive compounds. Although Hologic and Cytyc believe that their safety procedures for handling and disposing of such materials comply with the standards prescribed by federal, state and local regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. In the event of this type of accident, the combined company could be held liable for any resulting damages, and any such liability could be extensive. Hologic and Cytyc are also subject, and the combined company will be subject, to substantial regulation relating to occupational health and safety, environmental protection, hazardous substance control, and waste management and disposal. The failure to comply with such regulations could subject the combined company to, among other things, fines and criminal liability.

 

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Fluctuations in the exchange rates of European currencies and the other foreign currencies in which the combined company will conduct its business, in relation to the U.S. dollar, could harm the combined company’s business and prospects.

Hologic maintains a sales and service office in Belgium, and Hologic’s AEG Elektrofotografie subsidiary conducts its business worldwide, with headquarters in Germany and manufacturing operations in Germany and China. The expenses of these offices are denominated in local currencies, and Hologic’s foreign sales may be denominated in local currencies, the Euro or U.S. dollars.

Cytyc’s business outside the United States is conducted primarily in local currencies, except at its Costa Rica subsidiary, where the majority of business is conducted in U.S. dollars.

Fluctuations in foreign currency exchange rates could affect the combined company’s cost of goods and operating margins and could result in exchange losses. In addition, currency devaluation can result in a loss to the combined company if it holds deposits of that currency. Hologic has hedged its foreign currency exposure by borrowing funds in local European currencies to pay the expenses of its foreign offices. In addition, Hologic’s recently acquired AEG operation has engaged in hedging activities, such as currency swaps, to hedge its foreign currency exposure. There is a risk that any hedging activities will not be successful in mitigating the combined company’s foreign exchange risk exposure.

The combined company’s international operations expose the combined company to additional operational challenges that it might not otherwise face.

Hologic and Cytyc are, and the combined company will be, subject to a number of additional risks and expenses due to their international operations. Any of these risks or expenses could have a material adverse effect on the combined company’s operating results. These risks and expenses include:

 

   

difficulties in staffing and managing operations in multiple locations as a result of, among other things, distance, language and cultural differences;

 

   

protectionist laws and business practices that favor local companies;

 

   

greater difficulties in trade accounts receivable collection;

 

   

difficulties and expenses related to implementing internal controls over financial reporting and disclosure controls and procedures;

 

   

expenses associated with customizing products for clients in foreign countries;

 

   

possible adverse tax consequences;

 

   

governmental currency controls;

 

   

multiple, conflicting and changing government laws and regulations (including, among other things, antitrust and tax requirements, international trade regulations and the Foreign Corrupt Practices Act);

 

   

reduced protection for intellectual property rights in some countries;

 

   

political and economic changes and disruptions;

 

   

export/import controls; and

 

   

tariff regulations.

 

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The business of the combined company could be harmed if it is unable to protect its proprietary technology.

Hologic and Cytyc have relied, and the combined company will rely, primarily on a combination of trade secrets, patents, copyright and trademark laws and confidentiality procedures to protect its products and technology. Despite these precautions, unauthorized third parties may infringe, copy or reverse engineer portions of the combined company’s technology. Hologic and Cytyc do not know if current or future patent applications will be issued with the scope of the claims sought, if at all, or whether any patents issued will be challenged or invalidated. In addition, Hologic and Cytyc have each obtained or applied for corresponding patents and patent applications in several foreign countries for some of its patents and patent applications. There is a risk that these patent applications will not be granted or that the patent or patent application will not provide significant protection for Hologic’s, Cytyc’s or the combined company’s products and technology. Competitors of the combined company may independently develop similar technology that Hologic’s, Cytyc’s or the combined company’s patents do not cover. In addition, because patent applications in the United States are not generally publicly disclosed until eighteen months after the application is filed, applications may have been filed by third parties which relate to Hologic’s, Cytyc’s or the combined company’s technology. Moreover, there is a risk that foreign intellectual property laws will not protect the intellectual property rights of the combined company to the same extent as United States intellectual property laws. In the absence of significant patent protection, the combined company may be vulnerable to competitors who attempt to copy its products, processes or technology.

The combined company’s future success will depend on the continued services of key personnel.

The loss of any key personnel of the combined company, particularly key research and development personnel, could harm the combined company’s business and prospects and could impede the achievement of the combined company’s research and development, operational or strategic objectives. The combined company’s success will also depend upon its ability to attract and retain other qualified managerial and technical personnel. Competition for such personnel, particularly software engineers and other technical personnel, is intense. The combined company may not be able to attract and retain personnel necessary for the development of its business.

The combined company’s business may be harmed by acquisitions it completes in the future.

The combined company’s identification of suitable acquisition candidates involves risks inherent in assessing the values, strengths, weaknesses, risks and profitability of acquisition candidates, including the effects of the possible acquisition on its business, diversion of its management’s attention and risks and costs associated with unanticipated problems or latent liabilities, such as litigation, investigations or inquiries in connection with acquisitions that it completes. If the combined company is successful in pursuing future acquisitions, it will be required to expend significant funds, incur additional debt or issue additional securities, which may negatively affect its results of operations and be dilutive to the combined company’s stockholders. If the combined company spends significant funds or incurs additional debt, its ability to obtain financing for working capital or other purposes could decline, and it may be more vulnerable to economic downturns and competitive pressures. Neither Hologic nor Cytyc can guarantee that the combined company will be able to finance additional acquisitions or that the combined company will realize any anticipated benefits from acquisitions that it completes. Should the combined company acquire another business, the process of integrating acquired operations into its existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of its existing business.

The combined company’s failure to manage current or future alliances or joint ventures effectively may harm the combined company’s business and prospects.

Hologic and Cytyc have entered into, and the combined company may enter into, alliances, joint ventures or other business relationships. Alliances with certain partner or companies could make it more difficult for the

 

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combined company to enter into advantageous business transactions or relationships with others. Moreover, the combined company may not be able to:

 

   

identify appropriate candidates for alliances or joint ventures;

 

   

assure that any alliance or joint venture candidate will provide the combined company with the support anticipated;

 

   

successfully negotiate an alliance or joint venture on terms that are advantageous to the combined company; or

 

   

successfully manage any alliance or joint venture.

Furthermore, any alliance or joint venture may divert management time and resources. Entering into a disadvantageous alliance or joint venture, failing to manage an alliance or joint venture effectively, or failing to comply with obligations in connection therewith, could harm the combined company’s business and prospects.

The combined company will be exposed to potential risks and it will continue to incur significant costs as a result of the internal control testing and evaluation process mandated by Section 404 of the Sarbanes-Oxley Act of 2002.

Hologic assessed the effectiveness of its internal control over financial reporting as of September 30, 2006 and assessed all deficiencies on both an individual basis and in combination to determine if, when aggregated, they constitute a material weakness. As a result of this evaluation, no material weaknesses were identified.

Cytyc assessed the effectiveness of its internal control over financial reporting as of December 31, 2006, and determined that it did not implement controls necessary to provide reasonable assurance that the accounting for certain stock option exercise activity that occurred during the period from 1996 through 2002 was properly recorded in its financial statements included in its annual report on Form 10-K for the year ended December 31, 2006, in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. To remedy this material weakness Cytyc enhanced its policies surrounding consultations on complex technical accounting matters to include third-party subject matter experts, including experts with additional specific knowledge of the accounting for the types of stock option exercise activity described above, to assist Cytyc in reaching a conclusion regarding the accounting for this stock option exercise activity in accordance with Accounting Principles Board Opinion No. 25. This remediation effort was tested and found to be effective as of the date of the filing of Cytyc’s amendment to its annual report on Form 10-K for the year ended December 31, 2006.

Following the completion of the merger, the combined company expects to continue to incur significant costs, including increased accounting fees and increased staffing levels, in order to maintain compliance with Section 404 of the Sarbanes-Oxley Act. The combined company will continue to monitor controls for any weaknesses or deficiencies. No evaluation can provide complete assurance that the combined company’s internal controls will detect or uncover all failures of persons within the company to disclose material information otherwise required to be reported. The effectiveness of the combined company’s controls and procedures could also be limited by simple errors or faulty judgments. In addition, as the combined company continues to expand globally, the challenges involved in implementing appropriate internal controls will increase and will require that the combined company continues to improve its internal controls over financial reporting.

Hologic’s assessment of internal controls in fiscal 2006 did not include Hologic’s recently acquired entities of AEG, R2 and Suros. In 2007, Cytyc acquired Adeza Biomedical Corporation and Adiana, Inc. Hologic’s assessment of internal control over financial reporting is expected to include AEG, R2 and Suros in fiscal 2007, and is expected to include Cytyc, Adeza Biomedical Corporation and Adiana Inc. in fiscal 2008. The combined company expects to face additional challenges in implementing the required processes, procedures and controls as a result of the merger and other acquired operations. For example, Hologic’s recently acquired companies do

 

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not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by securities law applicable to public companies in the United States. Although the combined company intends to devote substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, the combined company cannot be certain that it will be successful in complying with Section 404 of the Sarbanes-Oxley Act.

In the future, if the combined company fails to complete the Sarbanes-Oxley 404 evaluation in a timely manner, or if its independent registered public accounting firm cannot attest in a timely manner to the combined company’s evaluation, the combined company could be subject to regulatory scrutiny and a loss of public confidence in the combined company’s internal controls which could adversely impact the market price of Hologic common stock. The combined company or its independent registered public accounting firm may identify material weaknesses in internal controls over financial reporting which may result in a loss of public confidence in the combined company’s internal controls and adversely impact the market price of Hologic common stock. In addition, any failure to implement required, new or improved controls, or difficulties encountered in their implementation, could harm the combined company’s operating results or cause the combined company to fail to meet its reporting obligations.

RISKS RELATED TO HOLOGIC COMMON STOCK

Provisions in Hologic’s charter and bylaws and its stockholder rights plan may have the effect of discouraging advantageous offers for Hologic’s business or common stock and limit the price that investors might be willing to pay in the future for shares of Hologic common stock.

Hologic’s charter, bylaws and the provisions of the DGCL include provisions that may have the effect of discouraging or preventing a change in control. In addition, Hologic has a stockholder rights plan that may have the effect of discouraging or preventing a change in control. These provisions could limit the price that Hologic stockholders might receive in the future for shares of Hologic common stock.

Hologic’s stock price is volatile.

The market price of Hologic common stock has been, and may continue to be, highly volatile. Hologic believes that a variety of factors could cause the price of its common stock to fluctuate, perhaps substantially, including:

 

   

announcements and rumors of developments related to Hologic’s business, including changes in reimbursement rates, proposed and completed acquisitions, or the industry in which Hologic competes;

 

   

quarterly fluctuations in Hologic’s actual or anticipated operating results and order levels;

 

   

general conditions in the worldwide economy;

 

   

announcements of technological innovations;

 

   

new products or product enhancements by Hologic or its competitors;

 

   

developments in patents or other intellectual property rights and litigation; and

 

   

developments in relationships with Hologic’s customers and suppliers.

In addition, in recent years the stock market in general and the markets for shares of “high-tech” companies, have experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of Hologic’s common stock, and the market price of Hologic common stock may decline.

 

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CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains certain forward-looking information about Hologic, Cytyc and the combined company that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this joint proxy statement/prospectus or may be incorporated into this joint proxy statement/prospectus by reference to other documents and may include statements for the period following the completion of the merger. Representatives of Hologic and Cytyc may also make forward-looking statements. Forward-looking statements are statements that are not historical facts. Words such as “expect,” “believe,” “will,” “may,” “might,” “anticipate,” “plan,” “estimate,” “intend,” “should,” “can,” “likely,” “could” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to statements about the expected benefits of the merger, information about the combined company, including expected synergies and projected revenues and cash flows, combined operating and financial data, including future financial and operating results, the combined company’s objectives, plans and expectations, the likelihood of satisfaction of certain conditions to the completion of the merger and whether and when the merger will be completed. These statements are subject to risks and uncertainties, including the risks described in this joint proxy statement/prospectus under the section “Risk Factors,” those listed in Annex B under “Information about Cytyc—Risk Factors” with respect to Cytyc, and those that are incorporated by reference into this joint proxy statement/prospectus with respect to Hologic that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of management of Hologic and Cytyc and are subject to a number of factors that could cause actual outcomes and results to be materially different from those projected or anticipated. In light of these risks, uncertainties, assumptions and factors, the forward-looking statements discussed in this joint proxy statement/prospectus or made by representatives of Hologic or Cytyc may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof or, in the case of statements incorporated by reference, on the date of the document incorporated by reference, or, in the case of statements made by representatives of Hologic or Cytyc, on the date those statements are made. All subsequent written and oral forward-looking statements concerning the merger or the combined company or other matters addressed in this joint proxy statement/prospectus and attributable to Hologic or Cytyc or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, neither Hologic nor Cytyc undertakes any obligation to update or publish revised forward-looking statements to reflect events or circumstances after the date hereof or the date of the forward-looking statements or to reflect the occurrence of unanticipated events.

 

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THE MERGER

The following discussion contains important information relating to the merger. You are urged to read this discussion together with the merger agreement and related documents attached as annexes to this joint proxy statement/prospectus before voting on the merger agreement and the merger or the amendment to Hologic’s charter and issuance of Hologic common stock in the merger.

Structure of the Merger

The merger agreement provides for the merger of Cytyc with and into Nor’easter Corp., a wholly owned subsidiary of Hologic that was formed for the purpose of the merger, with Nor’easter Corp. surviving the merger. At the effective time of the merger, the surviving entity will remain a wholly owned subsidiary of Hologic, and Nor’easter Corp. will be renamed “Cytyc Corporation.” The merger will become effective when Nor’easter Corp. and Cytyc file a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as Hologic and Cytyc mutually agree and specify in the certificate of merger). The time the merger becomes effective is referred to as the effective time of the merger.

Merger Consideration

At the effective time of the merger, each issued and outstanding share of Cytyc common stock will be converted into the right to receive 0.52 of a share, referred to as the exchange ratio, of Hologic common stock, referred to as the stock merger consideration, and $16.50 in cash without interest, referred to as the cash merger consideration. The stock merger consideration, together with the cash merger consideration and any cash received in lieu of fractional shares, is referred to as the merger consideration. Cytyc stockholders will receive cash in lieu of any fractional shares of Hologic common stock that would have otherwise been received in the merger. See “The Merger Agreement—Fractional Shares” beginning on page 118.

Hologic and Cytyc expect that, upon completion of the merger, assuming conversion of all of Cytyc’s outstanding 2.25% Senior Convertible Notes due 2024, the Cytyc stockholders immediately prior to the merger will own approximately 55% of the outstanding common stock of the combined company, and the Hologic stockholders immediately prior to the merger will own approximately 45% of the outstanding common stock of the combined company.

Background of the Merger

Each of Hologic’s and Cytyc’s board of directors has from time to time in recent years engaged with senior management in strategic reviews and considered ways to enhance its company’s performance and prospects in light of the business and economic environment. For each company, these reviews have included consideration of potential transactions with third parties that would further its strategic objectives and the potential benefits and risks of those transactions. With respect to both Hologic and Cytyc, these strategic reviews have on several occasions related to informal exploratory discussions regarding potential strategic transactions, including possible business combinations with each other and other companies in the life sciences/healthcare industry.

Given the relative close proximity and similar business focus of Hologic and Cytyc, both being Massachusetts-based public companies focused on women’s health, the companies have been familiar with each other’s businesses for a number of years.

Approximately three years ago, Thomas Umbel, senior vice president of business development of Hologic contacted a business development representative of Cytyc, to discuss whether the parties would be interested in further exploring potential business opportunities. Nothing materialized from these conversations at that time.

 

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Later, in May 2006, Mr. Umbel and Eric von Stetten, director of research of Hologic, and John P. McDonough, senior vice president of Cytyc, had informal discussions regarding the merits of a possible business combination between Hologic and Cytyc. These discussions remained preliminary and were not pursued further at that time.

On September 11, 2006, at a regular meeting of the board of directors of Hologic, Mr. von Stetten reviewed and discussed with the board of directors strategic initiatives and diversification opportunities within the women’s healthcare market, which included a discussion of the preliminary inquiries made to Cytyc.

On January 30, 2007, John W. Cumming, chairman and chief executive officer of Hologic, and Mr. Umbel met with representatives of Goldman Sachs to discuss possible strategic transactions with a number of companies, including Cytyc.

In February 2007, Mr. Umbel contacted Mr. McDonough to determine if Cytyc would be interested in re-examining a possible business combination.

On February 22, 2007, Mr. Umbel met with Mr. McDonough at Cytyc’s executive offices in Marlborough, Massachusetts to exchange views with respect to a possible business combination between Hologic and Cytyc.

On February 23, 2007, Patrick J. Sullivan, chairman, chief executive officer and president of Cytyc, and Mr. Cumming spoke by telephone regarding the possibility of combining the two companies and agreed to meet in person to discuss further.

During the week of February 26, 2007, Messrs. Cumming and Sullivan spoke by telephone and further discussed the possibility of a business combination between Hologic and Cytyc. Mr. Sullivan informed Mr. Cumming that he would discuss their conversation with certain members of senior management of Cytyc and its board of directors.

On March 6, 2007, at a meeting of the board of directors of Hologic, Mr. Cumming reviewed and discussed with the Hologic board of directors an overview of the women’s healthcare market and possible opportunities for Hologic in those markets, including the potential benefits of a possible business combination with Cytyc. In connection with that discussion, Mr. Cumming advised the board of directors of the preliminary status of discussions between Hologic and Cytyc. Following the discussion, Mr. Cumming was authorized to continue to pursue those discussions.

At a meeting of the Cytyc board of directors on March 14, 2007, members of Cytyc senior management reviewed with the Cytyc board of directors the prior discussions between representatives of Cytyc and Hologic and discussed with the Cytyc board of directors the strategic rationale for a potential business combination. In addition, representatives of Hogan & Hartson LLP, Cytyc’s outside legal counsel, referred to as Hogan & Hartson, discussed the fiduciary duties applicable to the Cytyc board of directors in the context of the ongoing discussions. Following questions and discussions among the participants at the meeting, the Cytyc board of directors authorized and directed Cytyc’s senior management to continue discussions with Hologic.

On March 21, 2007, Messrs. Cumming and Sullivan spoke by telephone and agreed to meet with each other and certain other members of senior management of each company to further explore a potential business combination between the parties.

On March 23, 2007, Messrs. Umbel and McDonough spoke by telephone to arrange future meetings and identify discussion topics.

On the evening of March 27, 2007, Messrs. Cumming and Umbel met with Messrs. Sullivan and McDonough. During this meeting, the parties had an in-depth conversation concerning the merits of a possible business combination between Hologic and Cytyc.

On the morning of March 28, 2007, Messrs. Cumming and Sullivan met to continue their discussion from the previous night.

 

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On April 5, 2007, the parties entered into a mutual confidentiality agreement, with customary standstill provisions, so that both parties could have access to more detailed information to explore further the possibility of a business combination.

On the evening of April 5, 2007, Messrs. Cumming, Umbel, and von Stetten, Robert A. Cascella, president and chief operating officer of Hologic, Glenn P. Muir, executive vice president of finance and chief financial officer of Hologic, and David Brady, senior vice president of human resources of Hologic, met with Mr. McDonough, Timothy M. Adams, chief financial officer of Cytyc, and Daniel J. Levangie, executive vice president of Cytyc and president of Cytyc surgical products. During this meeting, the parties discussed in further detail a possible business combination between Hologic and Cytyc and the possible synergies between the companies. Immediately prior to this meeting, representatives of Hologic had informed Mr. McDonough that Hologic would be prepared to consider offering, subject to, among other things, the satisfactory completion of due diligence and the negotiation of mutually agreeable definitive agreements, a significant premium to the current market price to acquire Cytyc and to use a combination of cash and shares of Hologic common stock as consideration in the transaction.

On April 6, 2007, at a special meeting of the board of directors of Hologic, the board of directors met with members of senior management and its outside legal counsel, Brown Rudnick Berlack Israels LLP, referred to as Brown Rudnick. During this meeting, senior management discussed its conversations with senior management of Cytyc, and reviewed the background and recent preliminary discussions that certain members of management had with representatives of Cytyc. Management and the board of directors discussed the potential benefits and risks associated with a business combination with Cytyc, the business and financial results of Cytyc, a possible range of prices and the mix of consideration to be offered to stockholders of Cytyc, and possible sources of financing for the transaction. Management also reported to the board of directors that follow-up meetings were planned with Cytyc management to further pursue this possible transaction. The board of directors also discussed with counsel its fiduciary duties applicable to the proposed transaction. Following these discussions, the board of directors of Hologic unanimously supported the continuance of further discussions with Cytyc.

On April 9, 2007, representatives of Hologic’s senior management team met with representatives of Cytyc’s senior management team at the Westin Hotel in Waltham, Massachusetts. During this meeting, the parties further discussed the possible benefits of a business combination, and commenced initial financial and business due diligence.

On April 23, 2007, the Cytyc board of directors held a telephonic meeting, together with members of Cytyc senior management and representatives of Hogan & Hartson and Morgan Stanley, Cytyc’s financial advisor. Management updated the Cytyc board of directors on the status of discussions with Hologic, including the proposed amount and mix of stock and cash consideration to be offered to Cytyc stockholders, and reviewed with the Cytyc board of directors the business, operations and products of Hologic. Representatives of Morgan Stanley reported on certain preliminary financial analyses with respect to the proposed transaction, and representatives from Hogan & Hartson discussed the fiduciary duties applicable to the Cytyc board of directors in the context of the proposed transaction. Following questions and discussions among those in attendance, the Cytyc board of directors authorized Cytyc management to continue discussions with Hologic.

Throughout the remainder of the month of April and the first week of May 2007, senior management and representatives of Hologic and Cytyc continued to meet to further explore a potential business combination transaction. During these meetings, the parties made presentations on a variety of aspects of each party’s business. The parties also continued to discuss the possible synergies between the companies, the benefits and challenges of the business combination, corporate governance and board composition matters, employee matters, and the mix of cash and stock consideration to be offered to Cytyc stockholders. The parties also conducted mutual financial, legal and other customary due diligence. During this period, representatives of Cytyc informed representatives of Hologic that Cytyc would seek a premium of at least 30% to the current market price and would seek to have at least 25-30% of the merger consideration be in cash. Further, Cytyc also requested

 

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significant board representation and that Mr. Sullivan assume the chairmanship of the combined company’s board of directors.

On April 30, 2007, at a special meeting of the board of directors of Hologic, the board of directors met with members of senior management and Brown Rudnick. During this meeting, senior management discussed its conversations with senior management of Cytyc and conversations between their respective investment bankers, and further discussed the amount and mix of cash and stock consideration to be offered to Cytyc stockholders. Following these discussions, the board of directors reaffirmed the authority of Mr. Cumming to continue to pursue the discussions with Cytyc.

On May 1, 2007, at the request of Hologic, Goldman Sachs contacted Morgan Stanley to offer 0.52 of a share of Hologic common stock and $16.25 in cash for each share of Cytyc common stock as merger consideration in the proposed business combination.

On the afternoon of May 2, 2007, the finance committee of the Cytyc board of directors met in Boston, Massachusetts, together with members of Cytyc senior management and outside legal counsel. Representatives of Morgan Stanley, Cytyc’s outside financial advisor, attended telephonically. Management updated the members of the committee on the status of discussions with Hologic and representatives of Morgan Stanley reported on certain preliminary financial analysis. Representatives of Hogan & Hartson discussed various legal issues with respect to the proposed transaction.

On the morning of May 3, 2007, the finance committee of the Cytyc board of directors met again in executive session to discuss the proposed transaction with Hologic. Later that morning, the full Cytyc board of directors met together with members of Cytyc senior management and outside legal and financial advisors. Management updated the Cytyc board of directors on the status of discussions with Hologic, including the proposed amount and mix of consideration to be offered to Cytyc stockholders, and the proposed governance and management of the combined company. Representatives of Morgan Stanley reported on certain preliminary financial analyses with respect to the proposed transaction based on the proposed amount and mix of cash and stock consideration to be offered to stockholders of Cytyc. Representatives from Hogan & Hartson discussed various legal issues with respect to the proposed transaction and reviewed the fiduciary duties applicable to the Cytyc board of directors in the context of the proposed transaction. Following questions and discussions among those in attendance, the Cytyc board of directors authorized Cytyc management to continue negotiations with Hologic and to work toward finalizing definitive terms regarding the potential transaction. Also, on May 3, 2007, the Cytyc board authorized Cytyc senior management to negotiate appropriate terms with Morgan Stanley and JP Morgan to serve as financial advisors to the board of directors in connection with the transaction, subject to review and approval of such arrangements by the board.

On May 4, 2007, further discussions were held between the members of the senior management teams of Hologic and Cytyc and representatives of Goldman Sachs and Morgan Stanley regarding the form and structure of a proposed business combination and to finalize the amount and value of the cash and stock components of the merger consideration. In these discussions, the parties agreed in principle that each share of Cytyc common stock would be converted into 0.52 of a share of Hologic common stock and $16.50 in cash. During the course of these discussions, on May 4, 2007, a special meeting of the finance committee of the Cytyc board of directors was held and Mr. Sullivan discussed with Cytyc’s directors the status of the negotiations between Cytyc and Hologic.

On May 4, 2007, at the direction of Hologic’s board of directors, members of Hologic’s senior management, together with representatives of Brown Rudnick, Goldman Sachs and representatives of Hologic’s due diligence advisors, engaged by Hologic to assist with accounting, financial and tax due diligence, had a telephone conference call to discuss the possible business combination with Cytyc. During this conference call, the participants discussed the proposed timeline for the negotiation and completion of a definitive agreement, preliminary terms for the proposed transaction, including a preliminary agreement on the mix of stock and cash merger consideration to be offered to Cytyc stockholders, the proposed due diligence process, and Hologic’s financing options.

 

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On May 6, 2007, outside legal counsel for Hologic and Cytyc had a telephone conference call to discuss timing, principal issues to be addressed in the merger agreement, and the due diligence process.

On May 7, 2007, senior management of Hologic, together with Brown Rudnick, Goldman Sachs, and representatives of Hologic’s due diligence advisors, had a telephone conference call to discuss an internal draft of the merger agreement.

From May 7, 2007 through May 19, 2007, Mr. Sullivan and other members of Cytyc senior management discussed with individual members of the Cytyc board of directors on multiple occasions the status of negotiations with Hologic.

On May 8, 2007, senior management of Hologic and Cytyc together with their financial advisors met to conduct business due diligence.

On May 9, 2007, at a special meeting of the board of directors of Hologic, the board of directors of Hologic met together with members of senior management and Brown Rudnick and Goldman Sachs. Management updated the board of directors regarding the status of discussions with Cytyc, and reported on its initial due diligence investigation of Cytyc. Representatives from Goldman Sachs presented its preliminary financial analyses with respect to the proposed transaction, and possible financing alternatives for the proposed transaction. Representatives from Brown Rudnick and Goldman Sachs also reviewed and discussed with the board of directors the terms contained in a proposed initial draft of the merger agreement. The representative of Brown Rudnick also discussed with the Hologic board of directors the fiduciary duties of the Hologic board of directors applicable to the proposed transaction. After discussion, the board of directors authorized management to continue the discussions and negotiations with Cytyc. The board of directors also discussed and approved the engagement of Goldman Sachs as Hologic’s financial advisor and to provide a fairness opinion in the transaction, and also discussed and authorized Hologic management to engage Jefferies to provide a second fairness opinion in the transaction.

On May 9, 2007, Hologic formally retained Goldman Sachs as an outside financial advisor, to advise Hologic in connection with this potential transaction.

On May 9, 2007, after the special meeting of Hologic’s board of directors, Brown Rudnick distributed an initial draft merger agreement to Cytyc and its advisors. Later that day, outside legal counsel for Hologic and outside legal counsel for Cytyc discussed the principal terms proposed in the initial draft of the merger agreement, including the structure of the transaction, the merger consideration, corporate governance matters, board composition, deal protection provisions and break-up fees. Outside legal counsel also further discussed due diligence matters.

From May 9, 2007 through May 20, 2007, Cytyc, Hologic, their outside legal counsel and financial advisors continued to work to finalize the terms of the merger agreement and the related transaction documents, while continuing to conduct mutual financial, legal and other customary due diligence.

On May 11, 2007, at a special meeting of the board of directors of Hologic, the board of directors of Hologic met together with members of management and Brown Rudnick. During the meeting, management updated the board of directors on the status of the discussions with Cytyc regarding the merger agreement, including outstanding issues relating to corporate governance under the merger agreement, discussions with Cytyc’s management regarding their continuing employment arrangements following the merger, and due diligence matters. Management also advised the board of directors of the status of the anticipated Goldman Sachs commitment for the financing for the proposed merger. Following these discussions the board of directors met in executive session with a representative of outside legal counsel. During the executive session representatives of Hologic’s outside legal counsel further discussed with the directors their fiduciary duties.

 

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On May 14, 2007, at a special meeting of the board of directors of Hologic, the board of directors, together with members of senior management and Brown Rudnick, reviewed and discussed in detail the merger agreement, including outstanding issues that were being negotiated. These issues included matters relating to deal protection provisions, break-up fees, corporate governance and board composition matters, and employee matters, such as change of control agreements and retention agreements for certain employees of Cytyc.

On May 15, 2007, Hologic formally retained Jefferies as an outside financial advisor, to provide a second fairness opinion in connection with this potential transaction.

On May 15, 2007, Messrs. Cumming and Brady, met with Messrs. Sullivan and Levangie and Bradley Thomas, senior vice president of human resources and organizational development of Cytyc, to further discuss employee benefits, corporate governance and board composition matters, and change of control agreements for Messrs. Sullivan and Levangie and retention packages for various levels of Cytyc employees, including Messrs. Sullivan and Levangie, certain senior vice presidents of Cytyc and certain vice presidents of Cytyc. See “—Interests of Cytyc Executive Officers and Directors in the Merger” commencing on page 95 for a further discussion of these agreements.

On May 15, 2007, at a special meeting of the board of directors of Hologic, the board of directors met with members of senior management and Brown Rudnick. During this meeting, management reviewed and discussed with the board of directors materials relating to the proposed financing for the proposed business combination. These discussions included a review of the proposed debt financing structure, sources and uses of funds, the combined company’s anticipated debt service capabilities, the initial financing structure, an indicative term sheet, including proposed fees and rates, the proposed terms of a takeout financing structure and a proposed timeline. Management also further updated the board of directors on the status of the negotiations with Cytyc, including the status of ongoing negotiations regarding change of control and retention agreements for certain Cytyc employees.

Later in the day on May 15, 2007, Hologic received a draft financing commitment letter, engagement letter and fee letter relating the financing for the transaction. Senior management of Hologic and Brown Rudnick continued to negotiate the financing commitment letter, engagement letter and fee letter through May 19, 2007.

On May 16, 2007, Mr. Cumming and Mr. Sullivan agreed in principle on the governance structure for the combined company that would result from the proposed transaction, with the board of directors of the combined company to consist of six Hologic designees and five Cytyc designees. The parties also agreed in principle that at the effective time of the merger the standing committees of the board of directors of Hologic would include an audit, a compensation, a nominating and corporate governance and a corporate development committee. Each of the audit, nominating and corporate governance and corporate development committees would consist of an odd number of directors, consisting of one more continuing Hologic director than continuing Cytyc directors, and the chairman of each of these committees would be a continuing Hologic director. The compensation committee would consist of an even number of continuing Hologic directors and continuing Cytyc directors, and the chairman would be a continuing Cytyc director.

On May 16, 2007, at a special meeting of the board of directors of Hologic, the board of directors met with members of senior management, Brown Rudnick and Cooper & Dunham LLP, Hologic’s separate intellectual property legal counsel. During this meeting, Cooper & Dunham LLP reported its due diligence findings. Following this report, Mr. Cumming discussed compensation matters relating to Hologic’s management team in the context of the proposed business combination, including the proposed conditional waiver by himself and Messrs. Cascella and Muir of their change of control rights, and a proposed retention agreement for Mr. Cascella. See “—Interests of Hologic’s Executive Officers and Directors in the Merger” commencing on page 75 for a further discussion of these waivers and agreements.

 

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On May 18, 2007, at a special meeting of the board of directors of Hologic, the board of directors met with members of senior management, Brown Rudnick, and representatives of Hologic’s due diligence advisors who had been conducting accounting, tax and other financial due diligence of Cytyc. During this meeting, representatives of Hologic’s due diligence advisors discussed their due diligence report relating to accounting, tax and financial matters. Mr. Cumming and Brown Rudnick then further updated the board of directors on the status of the negotiations and outstanding issues on the merger agreement.

On May 19, 2007, at a special meeting of the board of directors of Hologic, the board of directors met with members of senior management and Brown Rudnick and financial advisors. At the meeting, Brown Rudnick and members of senior management presented their final due diligence findings to the board of directors. Hologic senior management also summarized with the board of directors the rationale, opportunities, benefits, prospects and risks associated with a potential transaction with Cytyc. Brown Rudnick also reviewed and discussed in detail the final merger agreement, including changes made in the merger agreement since the draft discussed in detail at the May 14, 2007 meeting of the board of directors, the proposed amendment to Hologic’s certificate of incorporation to increase the number of authorized shares of common stock, the proposed amendments to Hologic’s amended and restated bylaws, and the proposed amendment to Hologic’s stockholder rights agreement. Mr. Muir and Brown Rudnick also reviewed and discussed the terms of the final financing commitment letter, including the terms and conditions and covenants associated with the contemplated financing, and the execution risk regarding the documentation of the loans.

At different times during the special meeting of the board of directors of Hologic, representatives of each of Goldman Sachs and Jefferies joined the meeting and reviewed their respective presentations with the board of directors of Hologic. At the conclusion of each of their respective presentations and responses to questions from the board of directors regarding their presentations, each of Goldman Sachs and Jefferies rendered to the Hologic board of directors its oral opinion (each of which opinions was later confirmed in writing), as described under “—Opinions of Financial Advisors to the Hologic Board of Directors” that, as of the date of its opinion, and based upon and subject to the assumptions, procedures, factors, limitations and qualifications set forth in its opinion, the merger consideration to be paid for each outstanding share of Cytyc common stock, taken in the aggregate, to be paid pursuant to the merger agreement, was fair, from a financial point of view, to Hologic.

During the meeting, the board of directors of Hologic met in executive session with Brown Rudnick to further discuss the final merger agreement and the transactions contemplated by the merger agreement. The compensation committee of the Hologic board of directors also met to review and discuss the proposed employment arrangements with officers of Hologic and Cytyc in connection with the merger. After review and discussion, the compensation committee approved each of these employee related agreements contemplated by the merger agreement.

Following review and discussion among the members of the Hologic board of directors, including consideration of the factors described under “— Hologic Reasons for the Merger” beginning on page 55, the Hologic board of directors unanimously determined that the transactions contemplated by the merger agreement, including the amendment to Hologic’s charter to increase the number of authorized shares of Hologic common stock and the issuance of shares of Hologic common stock in the merger, are advisable and in the best interests of Hologic and its stockholders, and the Hologic directors voted unanimously to approve the merger and the merger agreement, resolved to recommend these and related matters to Hologic’s stockholders for their approval and authorized Hologic’s management to take certain actions to bring the transaction negotiations to a successful conclusion, including, without limitation, the execution and delivery of the financing commitment and transactions contemplated thereby.

On May 20, 2007, the Cytyc board of directors convened a special meeting with Cytyc senior management, Hogan & Hartson, Morgan Stanley and JPMorgan. Representatives of Cytyc senior management updated the Cytyc board on the status of discussions with Hologic and with respect to certain terms of the proposed merger agreement that had been finalized over the past several days. Cytyc senior management then discussed with the

 

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Cytyc board the rationale, opportunities, benefits, prospects and risks associated with a potential transaction with Hologic based on the terms outlined in the proposed merger agreement. Representatives of each of Morgan Stanley and JPMorgan reviewed their respective presentations with the board of directors of Cytyc. At the conclusion of each of their respective presentations and responses to questions from the board of directors regarding their presentations, each of Morgan Stanley and JPMorgan rendered to the Cytyc board of directors its oral opinion (subsequently confirmed in writing) to the effect that, as of the date of its opinion, and subject to and based on the factors, assumptions, limitations and qualifications set forth in its opinion, the merger consideration to be received by the holders of Cytyc common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders. See “—Opinions of Financial Advisors to the Cytyc Board of Directors.” Members of senior management and representatives of Hogan & Hartson then provided the board of directors an overview of the due diligence review conducted with respect to Hologic by representatives of Cytyc, financial and accounting advisors, and Hogan & Hartson, and discussed the results of such review. Representatives of Hogan & Hartson then summarized the terms of the merger agreement with Hologic and related documents, including those areas that had been finalized in the past several days, and also discussed fiduciary duties of the Cytyc board of directors under the circumstances and the proposed amendment to the Cytyc stockholder rights agreement. Following these discussions, and further review and discussion among the members of the Cytyc board of directors, the Cytyc board of directors unanimously determined that the transactions contemplated by the merger agreement and the merger are advisable and fair to and in the best interests of Cytyc and its stockholders, and the Cytyc directors voted unanimously to approve the merger and to approve and adopt the merger agreement and the transactions contemplated thereby, including the merger.

Following the approvals of the boards of directors of each of Hologic and Cytyc, both companies executed the merger agreement and later that day issued a joint press release on May 20, 2007 announcing the transaction.

Hologic Reasons for the Merger

In reaching its decision to approve the merger agreement and recommend approval of an amendment to the Hologic charter to increase the number of authorized shares of common stock and the issuance of Hologic common stock in the merger, the Hologic board of directors consulted with Hologic’s management, as well as with its legal and financial advisors, and considered a number of factors, including the following factors which the Hologic board of directors viewed as generally supporting its decision to approve the merger and the merger agreement and recommend that Hologic stockholders vote “FOR” the proposal to amend the Hologic charter to increase the number of authorized shares of Hologic common stock and “FOR” the proposal to issue shares of Hologic common stock in the merger.

Strategic Considerations. Hologic’s board of directors considered a number of factors pertaining to the strategic rationale for the merger as supporting its decision to approve the merger, including the following:

 

   

the combined company will provide Hologic with a stronger financial base and a more diversified and balanced product portfolio while maintaining Hologic’s focus on women’s health;

 

   

the likelihood of the enhancement of the strategic position of the combined company, which combines Hologic’s and Cytyc’s complementary businesses, and creates a broader company with enhanced operational and financial flexibility and increased opportunities for growth;

 

   

the combined company’s complementary products and technologies position the combined company to offer a comprehensive product portfolio that addresses many screening and treatment needs for women. This product portfolio will enable the combined company to provide integrated solutions in screening, diagnostics and therapeutics for women’s health, including breast cancer, cervical cancer, menorrhagia, pre-natal health, osteoporosis, endometriosis and permanent contraception;

 

   

the combined company will be able to offer an expanded product portfolio with over 90% of its total revenue from products that have leading market shares in the United States;

 

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the combined company will have a comprehensive sales and service organization exclusively focused on women’s health in the diagnostic and medical technology industry in the United States, which is expected to significantly increase the combined company’s presence in hospitals, private practices and healthcare organizations;

 

   

the combined company’s integrated product offering and broader channel coverage should provide significant cross-selling opportunities across the organization, with increasing penetration of key customer segments, such as OB/GYNs and breast cancer treatment specialists;

 

   

the significantly greater scale and scope of the combined company’s operations is expected to better enable the combined company to take advantage of growth opportunities and creates a strong platform for further expanding operations through product development and complementary strategic transactions;

 

   

the complementary nature of the businesses, the relative close proximity of the two companies and the strong executive teams with proven records of successfully executing strategic transactions, are expected to facilitate an efficient integration of the two companies;

 

   

the combined company’s operations are expected to result in improved margins for Hologic;

 

   

the combination of the cross-selling opportunities, expanded international reach, and the penetration of new and existing markets are expected to enhance revenue growth;

 

   

the transaction is expected to generate annual cost savings from the enhanced efficiency of sales and marketing efforts, increased purchasing scale, sourcing and logistics efficiencies, and shared administrative services;

 

   

the transaction is expected to be accretive to Hologic’s adjusted earnings per share in the first year after the transaction closes and significantly accretive thereafter; and

 

   

the transaction is expected to enable the combined company to generate significant cash flows, which should enable the combined company to rapidly repay indebtedness incurred in connection with the transaction and reduce the leverage of the combined company resulting from the transaction.

Other Factors Considered by the Hologic Board of Directors. In addition to considering the factors described above, the Hologic board of directors considered the following additional factors, all of which it viewed as supporting its decision to approve the merger:

 

   

the business, operations, financial condition, earnings and prospects of each of Cytyc, Hologic and the combined company;

 

   

current and historical prices and trading information with respect to each of Cytyc’s and Hologic’s common stock, which assisted the Hologic board of directors in its conclusion that the merger was fairly priced;

 

   

the fact that the merger consideration represented a premium to Cytyc stockholders of approximately 33% based on the closing prices of each company’s stock on the Nasdaq Global Select Market on May 18, 2007, the last trading day before the merger was publicly announced, and that the exchange ratio and cash merger consideration is fixed, which the Hologic board believed was consistent with market practice for mergers of this type and with the strategic purpose of the merger;

 

   

the expected qualification of the merger as a reorganization under Section 368(a) of the Code, as described in the section entitled “Material United States Federal Income Tax Consequences of the Merger”;

 

   

the current and prospective competitive climate in the industries in which Hologic and Cytyc operate, including the potential for consolidation, and the alternatives reasonably available to Hologic if it did not pursue the merger;

 

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the expected benefits to customers and suppliers of Hologic and Cytyc, and the opportunities for the employees of the combined company;

 

   

the belief that the terms and conditions of the merger agreement are reasonable, including:

 

   

the fact that the representations and warranties and covenants are generally reciprocal;

 

   

the fact that the conditions to closing are limited;

 

   

the governance agreements with respect to the combined company post-merger, as further described under “—Board of Directors and Management of Hologic Following the Merger; Headquarters,” including the fact that (i) Mr. John W. Cumming will serve as chief executive officer of the combined company; (ii) the Hologic board of directors will consist of six continuing Hologic directors and five continuing Cytyc directors; (iii) the audit, nominating and corporate governance and corporate development committees will consist of an odd number of directors, with one more continuing Hologic director than continuing Cytyc directors and each such committee will be chaired by a Hologic director, and the compensation committee will consist of an even number of continuing Hologic directors and continuing Cytyc directors and such committee will be chaired by a continuing Cytyc director; and (iv) the principal executive offices of the combined company will continue to be located in Bedford, Massachusetts;

 

   

the fact that Hologic is permitted to provide material non-public information to and engage in negotiations with a third party that makes an acquisition proposal that is or is reasonably likely to lead to a superior proposal (as described in “The Merger Agreement—Certain Covenants—No Solicitation” beginning on page 122), on the terms and subject to the conditions of the merger agreement;

 

   

the ability of Hologic, under certain circumstances, to terminate the merger agreement in order to enter into an alternative transaction that is deemed by the Hologic board of directors to be a superior proposal;

 

   

the fact that the merger agreement permits the Hologic board of directors, under certain circumstances, to change its recommendation with respect to the merger in response to a material development or change in circumstances occurring or arising after the date of execution of the merger agreement that was not known to the Hologic board of directors as of, or prior to, the date of execution of the merger agreement, provided that the change or development is not, and does not result from, a change in the market price of the common stock of Cytyc primarily as a result of the announcement of the merger agreement and the transactions contemplated thereby;

 

   

the circumstances under which the termination fees are payable by Hologic or Cytyc under the merger agreement and the view of the Hologic board of directors that these provisions should not preclude a bona fide alternative proposal involving Hologic;

 

   

the fact that the termination fee provisions are the product of negotiations; and

 

   

the fact that the size of the termination fees are reasonable in light of the size and benefits of the merger;

 

   

the waivers executed by Messrs. Cumming, Cascella and Muir conditionally waiving certain change of control payments, the retention agreement to be entered into with Mr. Cascella, and the change of control agreements, retention and severance agreements and other similar retention arrangements to be offered to key employees of Cytyc should assist the combined company in retaining key employees;

 

   

the fact that Hologic secured fully committed debt financing in the amount of approximately $2.55 billion for the cash portion of the merger consideration, the repayment of existing debt and the expenses associated with the transaction and continued operations of the combined company;

 

   

the terms and conditions of the financing commitment letter, including the likelihood of completing the financing contemplated by the commitment letter on the anticipated schedule without significant risk;

 

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the financial analyses and presentations of each of Goldman Sachs and Jefferies, and their respective opinions, dated May 20, 2007, to the effect that, as of that date and based upon and subject to the assumptions, procedures, factors, limitations and qualifications set forth in their respective opinions, the merger consideration to be paid for each outstanding share of Cytyc common stock, taken in the aggregate, to be paid pursuant to the merger agreement, was fair, from a financial point of view, to Hologic. See “—Opinions of Financial Advisors to the Hologic Board of Directors” beginning on page 62; and

 

   

the anticipated market capitalization, earnings and adjusted earnings per share and capital structure of the combined company.

The Hologic board of directors weighed these advantages and opportunities against a number of other factors identified in its deliberations weighing negatively against the merger, including:

 

   

the possibility that the merger might not be completed or that completion might be delayed or subject to conditions that may be imposed by governmental authorities;

 

   

the challenges inherent in the combination of two businesses of the size and scope of Hologic and Cytyc and the possible diversion of management’s attention for an extended period of time;

 

   

the risk that the combined company might not retain key employees despite its best efforts;

 

   

the risk of not capturing all the anticipated cost savings and operational synergies between Hologic and Cytyc and the risk that other anticipated benefits might not be realized;

 

   

regulatory and litigation risks associated with the transaction or with the combination of the two companies;

 

   

the fees and expenses associated with completing the merger and retaining key personnel;

 

   

risks associated with the incurrence of significant indebtedness to complete the merger, such as the increased leverage of the combined company and restrictions on operations of the combined company following the completion of the merger;

 

   

the fact that the stockholders of Hologic immediately prior to the merger will own approximately 45% of the combined company immediately following the merger (assuming conversion of all of Cytyc’s outstanding 2.25% Senior Convertible Notes due 2024);

 

   

the fact that the merger is expected to have a dilutive effect on earnings per share of Hologic calculated in accordance with U.S. GAAP;

 

   

the fact that Hologic expects to incur additional charges related to write-offs in connection with in-process research and development;

 

   

the fact that upon termination of the merger agreement under specified circumstances, Hologic may be required to pay Cytyc a termination fee of either $33 million or $100 million depending on the termination event and this termination fee may discourage other parties that may otherwise have an interest in a business combination with, or an acquisition of, Hologic; and

 

   

the other risks of the type and nature described under “Risk Factors”, and the matters described under “Cautionary Statement Regarding Forward-Looking Statements.”

In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Hologic board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination (i) to approve the merger agreement and the transactions contemplated thereby, and (ii) to recommend that Hologic stockholders vote “FOR” the proposal to amend the Hologic charter to increase the number of authorized shares of Hologic common stock and “FOR” the proposal to issue shares of Hologic common stock in

 

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the merger. In addition, individual members of the Hologic board of directors may have given differing weights to different factors. The Hologic board of directors conducted an overall analysis of the factors described above, including through discussions with, and questioning of, Hologic’s management and outside legal counsel and financial advisors.

In considering the recommendation of the Hologic board of directors with respect to the proposal to amend the Hologic charter to increase the authorized shares of common stock and issue shares of Hologic common stock in the merger, you should be aware that certain Hologic directors and officers have arrangements that may cause them to have interests in the transaction that are different from, or are in addition to, the interests of Hologic stockholders generally. See “—Interests of Hologic Executive Officers and Directors in the Merger” beginning on page 75.

Hologic’s board of directors considered all these factors together and, on the whole, thought them to be favorable to and to support its determination to recommend approval by Hologic stockholders of the proposals necessary to complete the merger.

Recommendation of the Hologic Board of Directors

At its May 19, 2007 meeting, after due consideration with members of Hologic’s senior management and Hologic’s outside legal counsel and financial advisors, the Hologic board of directors unanimously determined that the merger agreement, and the transactions contemplated by the merger agreement, including the amendment to the Hologic charter to increase the number of authorized shares of common stock and the issuance of Hologic common stock in the merger, are advisable to and in the best interests of Hologic and its stockholders. Accordingly, the Hologic board of directors unanimously recommends to its stockholders that they vote “FOR” the proposal to amend the Hologic charter to increase the number of authorized shares of Hologic common stock, “FOR” the proposal to issue shares of Hologic common stock in the merger, “FOR” the approval of the Hologic, Inc. Senior Executive Short-Term Plan, “FOR” the approval of the amendment to Hologic’s Seconded Amended and Restated 1999 Equity Incentive Plan and “FOR” the adjournment of the special meeting, including, if necessary, to solicit additional proxies in favor of any of the foregoing proposals.

Financing of the Merger

At the time Hologic signed the merger agreement, it entered into a commitment letter with Goldman Sachs Credit Partners L.P., dated as of May 20, 2007. The commitment letter was amended and restated on June 26, 2007 to include Banc of America Securities LLC, Bank of America, N.A., Banc of America Bridge LLC, Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Inc. as additional arrangers of the financing. These arrangers, together with Goldman Sachs Credit Partners L.P., are referred to as the arrangers. Under the amended and restated commitment letter, referred to as the commitment letter, the arrangers have agreed to provide senior secured financing in an aggregate principal amount of up to $2.55 billion to Hologic at or about the closing date of the merger. Hologic will use the proceeds of new senior secured credit facilities together with the combined company’s available cash:

 

   

to pay the cash consideration of the merger totaling approximately $2.1 billion;

 

   

to repay in full all borrowings outstanding, if any, and terminate all commitments under Cytyc’s existing first lien senior secured credit facility;

 

   

to repay in full all borrowings outstanding, if any, and terminate all commitments under Hologic’s existing senior secured revolving credit facility; and

 

   

to pay fees, commissions and expenses, estimated to be approximately $100 million, incurred by the combined company in connection with the merger transaction.

 

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Hologic may also use the proceeds of the new senior secured credit facility, together with the combined company’s available cash, to redeem all or a part of Cytyc’s outstanding $250 million 2.25% Senior Convertible Notes due 2024, which have not been converted into Cytyc common stock and which have been delivered to Cytyc or Hologic for redemption.

The following is a summary of the material provisions of the proposed new credit facilities anticipated in connection with the commitment letter. The terms, conditions and covenants of the new credit facilities are subject to the negotiation, execution and delivery of definitive credit documents. Accordingly, some of the actual terms, conditions and covenants of the new credit facilities may differ in important respects from those we describe below.

Hologic Loan Parties. The commitment letter contemplates that Hologic will be the borrower under the new facilities and that all obligations under the facilities will be guaranteed by all domestic subsidiaries of Hologic, including Cytyc and its subsidiaries, provided that neither immaterial subsidiaries of Hologic nor any subsidiary of Hologic that is a Massachusetts securities corporation will be a guarantor. Hologic and the subsidiary guarantors under the new facilities are referred to as the Hologic loan parties.

Credit Facilities. It is contemplated that Hologic will obtain up to $2.55 billion principal amount of credit facilities on the closing date of the merger. The credit facilities to be obtained on the merger closing date will consist of:

 

   

a senior secured tranche A term loan facility, known as the term loan A facility, in a total principal amount of up to $250 million;

 

   

a senior secured tranche B term loan facility, known as the term B loan facility, in a total principal amount of up to $850 million;

 

   

a senior secured capital markets term loan, known as the term loan X facility, in a total principal amount of up to $1.25 billion; and

 

   

a revolving credit facility in a total available principal amount of up to $200 million, provided that no more than $100 million of this facility may be drawn on the merger closing date.

It is contemplated that Hologic may elect, after the closing date and subject in certain circumstances to pro forma compliance by the Hologic loan parties with a specified ratio of total debt to adjusted consolidated EBITDA and other conditions, to increase, under terms and conditions to be determined, the total principal amount of borrowings available under the credit facilities by up to $250 million. EBITDA means earnings before interest, taxes, depreciation and amortization.

Security. The commitment letter contemplates that the obligations of the Hologic loan parties under the credit facilities will be secured by first-priority liens on, and first-priority security interests in, substantially all of their assets and a first priority security interest in 100% of the capital stock of each guarantor, 65% of the capital stock of each of the first-tier foreign subsidiaries of Hologic (other than immaterial foreign subsidiaries) and all intercompany debt.

Maturity and Principal Payments. It is contemplated that the final maturity dates for the credit facilities will be as follows:

 

   

for the term loan A facility, 5 years after the merger closing date;

 

   

for the term B loan facility, 5.5 years after the merger closing date;

 

   

for the term loan X facility, 18 months after the merger closing date; and

 

   

for the revolving loan facility, 5 years after the merger closing date.

It is contemplated that Hologic will be required to make scheduled principal payments under the term A loan facility in increasing amounts ranging from $3.125 million per quarter on the first quarter following the merger closing date to $9.375 million per quarter commencing the thirteenth quarter following the merger closing date, and under the term B facility, in equal quarterly installments of 0.25% of the total principal amount of the term loan B facility as of the merger closing date during the first 21 quarters after the merger closing date,

 

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with the remaining balance of each term loan facility due at the maturity of the applicable term loan facility. The revolving credit facility and the term loan X facility are contemplated to become due at maturity. It is not anticipated that any scheduled amortizations will be required under the revolving facility or the term loan X facility.

It is contemplated that Hologic will be required to make principal repayments first, pro rata among the term loan facilities and second to the revolving credit facility from specified excess cash flows from operations and from the net proceeds of specified types of asset sales, debt issuances, insurance recoveries and equity offerings, provided, however, that net proceeds from certain debt issuances and equity offerings are contemplated to be applied first to the term loan X facility until such facility is repaid in full.

It is contemplated that Hologic may voluntarily prepay any of the credit facilities without premium or penalty (other than applicable breakage costs related to interest on Eurodollar loans).

Interest Payments; Revolver Commitment Fee. It is contemplated that borrowings outstanding under the facilities will bear interest, at Hologic’s option, at an annual rate equal to either:

 

   

a specified “base rate” plus a margin to be determined; or

 

   

a specified Eurodollar rate plus a margin to be determined.

It is contemplated that the margin applicable to loans under the revolving credit facility and the term loan A facility will be subject to specified changes based on certain changes in a specified leverage ratio to be negotiated.

It is contemplated that borrowings outstanding under the new credit facilities with reference to a base rate generally will be payable by Hologic on a quarterly basis. For credit facilities bearing interest with reference to Eurodollar rates, interest shall be payable on the last day of selected interest periods (which shall be one, two, three and six months and in certain circumstances, nine or twelve months) unless the interest period exceeds three months, in which case, interest will be due at the end of every three months.

It is contemplated that Hologic will pay a quarterly commitment fee, at an annual rate of 0.50%, on the undrawn commitments available under the revolving credit facility, subject to reduction based on a leverage ratio to be negotiated.

Covenants. The commitment letter contemplates that the new credit facilities will contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants restricting the ability of the Hologic loan parties, subject to negotiated exceptions, to:

 

   

incur additional indebtedness and additional liens on their assets;

 

   

engage in mergers or acquisitions or dispose of assets;

 

   

enter into sale-leaseback transactions;

 

   

pay dividends or make other distributions;

 

   

voluntarily prepay other indebtedness;

 

   

enter into transactions with affiliated persons;

 

   

make investments; and

 

   

change the nature of their businesses.

It is also contemplated that the new credit facilities will require the Hologic loan parties to maintain maximum leverage and interest coverage ratios.

Other Provisions. The commitment letter contemplates that the definitive loan documents will contain customary representations and warranties by the Hologic loan parties, as well as customary events of default,

 

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including an event of default upon a change of control of Hologic. Hologic expects that an event of default will occur under the new credit facilities if it or, in some circumstances, another Hologic loan party fails to make any payment when due, fails to comply with affirmative or negative covenants, makes a misrepresentation, defaults on other specified indebtedness, fails to discharge specified judgments, becomes subject to specified claims under ERISA, or becomes subject to specified events of bankruptcy. If an event of default occurs and is not cured within any applicable grace period or is not waived, the lenders would have the right to accelerate repayment of the indebtedness under the credit facilities to the extent provided in the credit documents and applicable law. If its indebtedness were accelerated, Hologic may not have sufficient funds to pay such indebtedness. In such event, Hologic’s lenders would be entitled to enforce their security interests in the collateral securing the indebtedness, which will include substantially all of the assets of Hologic and its subsidiaries.

Anticipated Post-merger Refinancing. As soon as practicable after the effective time of the merger, Hologic intends to cause the combined company to seek to refinance a substantial portion of the debt incurred under the proposed new credit facilities with convertible debt or other equity or equity-linked financing, with reduced interest rates, extended maturity and limited or no restrictive or other financial covenants.

Opinions of Financial Advisors to the Hologic Board of Directors

Hologic retained Goldman Sachs and Jefferies as financial advisors to the Hologic board of directors in connection with the merger.

On May 19, 2007, at a meeting of the Hologic board of directors held to evaluate the proposed merger, each of Goldman Sachs and Jefferies delivered to the Hologic board of directors separate oral opinions, which opinions were confirmed by delivery of separate written opinions dated May 20, 2007, to the effect that, as of that date and based on and subject to the assumptions, procedures, factors, limitations and qualifications set forth in each such opinion, the merger consideration to be paid for each outstanding share of Cytyc common stock, taken in the aggregate, to be paid pursuant to the merger agreement, was fair, from a financial point of view, to Hologic.

Goldman Sachs’ and Jefferies’ opinions dated May 20, 2007, the full texts of which describe the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Goldman Sachs and Jefferies, are attached hereto as Annex C and Annex D, respectively, and are incorporated into this joint proxy statement/prospectus by reference. Goldman Sachs’ and Jefferies’ opinions were directed only to the fairness to Hologic, from a financial point of view, of the merger consideration provided for in the merger and do not address any other aspect of the merger. The opinions do not address the relative merits of the merger as compared to other business strategies or transactions that might be available with respect to Hologic or Hologic’s underlying business decision to effect the merger. The opinions do not constitute a recommendation as to how any holder of Hologic common stock or Cytyc common stock should vote at any stockholders’ meeting to be held in connection with, or take any action with respect to, the merger. Holders of Hologic common stock are encouraged to read the opinions carefully in their entirety. The summaries of Goldman Sachs’ and Jefferies’ opinions described below are qualified in their entirety by reference to the full texts of the opinions.

Opinion of Goldman Sachs. At the special meeting of the Hologic board of directors on May 19, 2007, Goldman Sachs rendered its oral opinion, subsequently confirmed in writing, to the Hologic board of directors that, as of that date and based upon and subject to the assumptions, procedures, factors, limitations and qualifications set forth in such opinion, the merger consideration to be paid for each outstanding share of Cytyc common stock, taken in the aggregate, to be paid pursuant to the merger agreement, was fair, from a financial point of view, to Hologic.

The full text of the written opinion of Goldman Sachs, dated May 20, 2007, which sets forth the assumptions made, procedures followed, matters considered and qualifications and limitations on the

 

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review undertaken in connection with its opinion, is attached as Annex C to this joint proxy statement/ prospectus and is incorporated herein by reference. Hologic stockholders should read the opinion in its entirety. Goldman Sachs provided its opinion for the information and assistance of the Hologic board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Hologic common stock or Cytyc common stock should vote at any stockholders’ meeting to be held in connection with, or take any action with respect to, the merger.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs has reviewed, among other things:

 

   

the merger agreement;

 

   

annual reports to stockholders and annual reports on Form 10-K of Hologic and Cytyc for the five fiscal years ended on the Saturday closest to September 30, 2006 for Hologic, and December 31, 2006 for Cytyc;

 

   

certain interim reports to stockholders and quarterly reports on Form 10-Q of Hologic and Cytyc;

 

   

certain other communications from Hologic and Cytyc to their respective stockholders;

 

   

certain internal financial analyses and forecasts for Cytyc prepared by its management, as reviewed by the management of Hologic, and certain internal financial analyses and forecasts for Hologic prepared by its management and certain internal pro forma analyses and forecasts of Hologic and Cytyc prepared by the management of Hologic; and

 

   

certain cost savings and operating synergies projected by the respective managements of Hologic and Cytyc to result from the transaction.

Goldman Sachs also held discussions with members of the senior management of Hologic and Cytyc regarding their assessment of the strategic rationale for, and the potential benefits of, the transaction and the past and current business operations, financial condition, and future prospects of Hologic and Cytyc. In addition, Goldman Sachs reviewed the reported price and trading activity for the shares of Hologic common stock and the shares of Cytyc common stock, compared certain financial and stock market information for Hologic and Cytyc with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the medical device and diagnostics industry specifically and in other industries generally, and performed such other studies and analyses, and considered such other factors, as it considered appropriate.

Goldman Sachs has relied upon the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of the opinion described above. Goldman Sachs assumed, with the consent of the Hologic board of directors, that the financial forecasts and the cost savings and operating synergies projected by Hologic and Cytyc, were reasonably prepared on a basis reflecting the then best currently available estimates and judgments of the management of Hologic and Cytyc. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Hologic or Cytyc or any of their respective subsidiaries and no such evaluation or appraisal was furnished to Goldman Sachs.

Goldman Sachs’ opinion did not address the underlying business decision of Hologic to engage in the merger, nor did Goldman Sachs express any opinion as to the prices at which shares of Hologic common stock or Cytyc common stock will trade at any time. Goldman Sachs also assumed that all governmental, regulatory or other consents and approvals necessary for completion of the transaction will be obtained without any adverse effect on Hologic or Cytyc or on the expected benefits of the transaction in any way meaningful to its analysis. Goldman Sachs’ opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Goldman Sachs as of, the date therein.

 

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Goldman Sachs’ advisory services and opinion were provided for the information and assistance of the Hologic board of directors in connection with its consideration of the transaction and its opinion did not constitute a recommendation as to how any holder of Hologic common stock should vote in respect of the transaction.

The following is a summary of the material financial analyses used by Goldman Sachs and presented to the board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular form. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before May 18, 2007 and is not necessarily indicative of current market conditions.

Cytyc Implied Financial Analysis

Transaction Overview and Valuation Statistics. Goldman Sachs reviewed with the Hologic board of directors the basic structure of the transaction as described to Goldman Sachs by Hologic management, including the following:

 

   

consideration of $16.50 and 0.52 shares of Hologic common stock for each share of Cytyc common stock;

 

   

the implied offer price of $46.46 per share (based on the May 18, 2007 closing price of Hologic’s common stock of $57.61); and

 

   

pro forma ownership, based on 132.4 million diluted shares of Cytyc common stock outstanding, by current Hologic stockholders of approximately 45% of the combined company.

Goldman Sachs calculated for the Hologic board of directors various multiples and premiums resulting from the merger, based on information provided by Hologic management and Cytyc management (as used herein, reference to information provided by Cytyc management refers to such information as reviewed and adjusted by Hologic management). The following table presents the results of Goldman Sachs’ calculations:

 

      Implied Transaction
Multiples Without
Synergies
   Implied Transaction
Multiples With
Synergies (1)

FY 2008E EBITDA

   16.3x    15.2x

FY 2009E EBITDA

   13.3x    12.5x

FY 2008E Cash Net Income

   28.6x    26.6x

FY 2009E Cash Net Income

   22.8x    21.3x

FY 2008E GAAP Net Income

   30.9x    28.5x

FY 2009E GAAP Net Income

   24.5x    22.8x

(1) Potential cost synergies of $25 million to $30 million within two years, based on Hologic and Cytyc management preliminary projections.

Comparable Trading Multiple Analysis. Goldman Sachs reviewed and compared certain financial information of Cytyc to corresponding financial information, ratios and public market multiples for these publicly traded companies in the medical device and specialized diagnostics industry:

 

   

Ventana Medical Systems, Inc.;

 

   

Hologic;

 

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Digene Corp.;

 

   

Immucor, Inc.;

 

   

Gen-Probe Inc.; and

 

   

American Medical Systems Holdings, Inc.

Although none of the selected companies is directly comparable to Cytyc, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Cytyc.

Goldman Sachs calculated and compared various financial multiples and ratios for the selected companies and for Cytyc, based on financial data as of May 18, 2007, estimates for the selected companies from Institutional Brokerage Estimate System (IBES), and Cytyc management’s projections of Cytyc as adjusted to Hologic’s September fiscal year end. With respect to the selected companies and Cytyc, Goldman Sachs calculated enterprise value, which is the market value of common equity plus the estimated market value of debt less cash, as a multiple of 2007E and 2008E earnings before interest, taxes and depreciation and amortization (EBITDA). Goldman Sachs also calculated, based on fiscal year end Cytyc management projections adjusted to Hologic September fiscal year end, the implied transaction value multiples for 2007E and 2008E EBITDA (with and without synergies projected by Cytyc’s and Hologic’s respective managements ). Goldman Sachs compared the multiples of the selected companies to the implied transaction multiples. The result of this analysis is summarized as follows:

 

          Implied Transaction Value Multiples

Enterprise value as a multiple of:

   Selected Companies Range    Without
Synergies
  

With

Synergies

2007E EBITDA

   14.8x –28.9x    21.0x    20.3x

2008E EBITDA

   11.7x –19.0x    16.3x    15.2x

With respect to the selected companies, Goldman Sachs also calculated the ratio of market price to earnings (P/E ratio) for 2007E and 2008E earnings (based on generally accepted accounting principles (GAAP) net income). Goldman Sachs compared the P/E ratios of the selected companies to the implied transaction value P/E ratios. With respect to Cytyc, Goldman Sachs calculated the implied transaction value P/E ratios for 2007E and 2008E earnings for:

 

   

projected GAAP net income;

 

   

cash net income without synergies; and

 

   

cash net income with synergies projected by Cytyc’s and Hologic’s respective managements.

Each of the implied transaction value P/E ratio calculations above was based on fiscal year end Cytyc management projections adjusted to Hologic’s September fiscal year end. The result of this analysis is summarized as follows:

 

          Implied Transaction Value P/E Ratios

P/E ratio

   Selected Companies Range    GAAP Net
Income
  

Cash Net

Income Without
Synergies

   Cash Net
Income With
Synergies

2007E

   33.1x –39.2x    40.9x    37.3x    35.9x

2008E

   19.2x –33.2x    30.9x    28.6x    26.6x

 

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Comparison of Selected Transactions. Goldman Sachs analyzed certain publicly available information relating to the following selected completed and pending transactions in the medical device and diagnostics industry since 1999:

 

Announcement Date

  

Buyer

  

Target

May 14, 2007

   Cardinal Health, Inc.    Viasys Healthcare Inc.

May 9, 2007

   Inverness Medical Innovations, Inc.    Biosite Inc.

February 26, 2007

   Cytyc    Adiana Inc.

February 12, 2007

   Cytyc    Adeza Biomedical Corp.

January 29, 2007

   MDS Inc.    Molecular Devices Corp.

January 18, 2007

   General Electric Co.    Abbott Laboratories—Diagnostics

January 8, 2007

   Advanced Medical Optics, Inc.    IntraLase Corp.

October 9, 2006

   Danaher Corp.    Vision Systems

August 14, 2006

   Becton, Dickinson and Co.    TriPath Imaging, Inc.

June 29, 2006

   Siemens AG    Bayer AG—Diagnostics

June 5, 2006

   American Medical Systems Holdings, Inc.    Laserscope

May 8, 2006

   Thermo Electron Corp.    Fisher Scientific International Inc.

April 27, 2006

   Siemens AG    Diagnostic Products Corp.

April 25, 2006

   Millipore Corp.    Serologicals Corp.

April 24, 2006

   Hologic    R2 Technology, Inc.

April 17, 2006

   Hologic    Suros Surgical Systems, Inc.

March 27, 2006

   Coloplast A/S    Mentor Corp. (Urology division)

December 16, 2005

   Johnson & Johnson    Animas Corp.

March 7, 2005

   Cytyc    Proxima Therapeutics, Inc.

November 9, 2004

   Advanced Medical Optics, Inc.    VISX, Inc.

June 15, 2004

   American Medical Systems Holdings, Inc.    TherMatrx, Inc.

March 1, 2004

   Cytyc    Novacept, Inc.

December 16, 2002

   American Medical Systems Holdings, Inc.    CryoGen, Inc.

December 16, 1999

   American Medical Systems Holdings, Inc.    Influence, Inc.

Although none of the selected transactions or the companies party to the transactions is directly comparable to the merger or to Hologic or Cytyc, the above transactions were chosen because they involve transactions that, for purposes of analysis, may be considered similar to the merger and/or involve publicly traded companies with operations that, for purposes of analysis, may be considered similar to certain operations of Hologic and Cytyc.

For each of the selected transactions, Goldman Sachs calculated and, to the extent information was publicly available, compared enterprise value as a multiple of each of sales, EBITDA and earnings before interest and taxes (EBIT), in each case, on a GAAP net income basis and for the latest twelve months, or LTM, prior to the date that the merger was announced, and compared such multiples to the implied Cytyc transaction value multiples. The following tables present the results of this analysis:

 

     Implied Transaction Value
as Multiple of LTM
 

Selected Transactions

   Sales     EBITDA     EBIT  

High

   8.8 x   42.5 x   60.4 x

Mean

   4.8 x   20.6 x   29.6 x

Median

   4.5 x   18.4 x   27.5 x

Low

   2.0 x   12.2 x   13.9 x

Implied Cytyc transaction value multiples (1)

   9.0 x   20.0 x   26.7 x

(1) Implied Cytyc transaction value as multiples of LTM Sales, EBITDA and EBIT are pro forma for historical acquisitions and one-time adjustments, based on information from Cytyc management.

 

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Goldman Sachs also calculated the premiums paid based on the closing stock price of the target one day prior to the announcement of each transaction, and premium paid based on the closing stock price of the target one month prior to the announcement of each transaction or the undisturbed stock price in contested situations, and compared such premiums to the premium derived from the implied Cytyc transaction value multiples. The following tables present the results of this analysis:

 

Selected Transactions

   Premium
one day
prior
    Premium
one month
prior
 

High

   117.4 %   163.2 %

Mean

   46.7 %   50.3 %

Median

   44.8 %   43.6 %

Low

   5.6 %   13.1 %

Implied Cytyc transaction multiples (1)

   32.5 %   32.4 %

(1) Implied Cytyc transaction value as multiples of LTM Sales, EBITDA and EBIT are pro forma for historical acquisitions and one-time adjustments, based on information from Cytyc management

Cytyc Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash flow analysis on Cytyc using the financial forecasts provided by Cytyc management. Goldman Sachs calculated implied net present values of projected free cash flows for Cytyc, as provided by Cytyc management, for the years 2007 through 2011 using discount rates ranging from 8.0% to 10.0% and using terminal values in the year 2011 based on forward after tax earnings before interest, taxes and amortization (EBITA) multiples ranging from 18.0x to 22.0x. These analyses indicated implied Cytyc equity value per share from $50.38 to $63.25 per share. In addition, for the benefit of Hologic management and the Hologic board of directors, Goldman Sachs ran a downside sensitivity case analysis based on a 9.0% discount rate and a 20.0x forward after tax EBITA multiple with a range of decrease in Cytyc margin from 0.0% to 4.0% and a range of decrease in Cytyc revenue growth between 0.0% to 6.0%, which analysis indicated implied Cytyc equity value per share from $42.76 to $56.65 per share.

Comparative and Contribution Analysis

Comparative Discounted Cash Flow Analyses. Goldman Sachs performed a comparative discounted cash flow analysis on Hologic and the combined company using the financial forecasts provided by Hologic management, Cytyc management and, in the case of the combined company, the savings from synergies and benefits projected by Hologic and Cytyc management to be realized following the merger.

Goldman Sachs calculated implied net present values of projected free cash flows for Hologic on a standalone and pro forma basis based on forecasts provided by Hologic management and Cytyc management, for the years 2007 through 2011 using discount rates ranging from 9.0% to 11.0% and using terminal values in the year 2011 based on forward after tax EBITA multiples ranging from 18.0x to 22.0x. Hologic management provided two alternative forecasts, management’s base case and an upside sensitivity case (the primary difference of which is, for illustrative sensitivity purposes, increases in the compounded annual growth rates for revenue and improvements in the operating margins). Goldman Sachs calculated implied equity values per share without synergies for Hologic on a standalone and with and without synergies on a pro forma basis, based on Hologic management’s and Cytyc management’s preliminary estimates of synergies. The pro forma values exclude the impact of Hologic and Cytyc net operating losses, assume a mid-year convention and 37.0% tax rate, and are discounted to September 30, 2007. The pro forma discounted cash flow analysis assumes $2.186 billion of pro forma net debt based on total cash financing needs and cash balances as of September 30, 2007, and 125.8 million pro forma fully diluted shares (including Hologic shares to be issued in a small, pending private acquisition).

The analysis based on the forecasts resulted in implied standalone Hologic equity value per share ranges ranging from $45.68 to $68.62. With respect to the combined company, the analysis resulted in implied pro forma equity value per share ranges ranging from $54.73 to $78.68 with synergies and $52.38 to $75.76 without synergies.

 

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Illustrative Contribution Analysis. Goldman Sachs analyzed and compared the relative contributions to be made by each of Hologic and Cytyc, based on the forecasts of EBITDA and cash net income for fiscal years 2008 through 2011 provided by Hologic management and Cytyc management, for both the management base case and the upside sensitivity case and with and without synergies provided by Hologic management and Cytyc management preliminary estimates.

For comparison to the approximately 45% ownership that will be retained by Hologic in the combined company, Goldman Sachs calculated the implied percentage of equity for both Hologic and Cytyc based on their relative contribution to EBITDA and Cash Net Income by using Hologic’s implied trading multiples for the alternative forecasts. Included in these analyses were potential cost synergies based on Hologic management’s and Cytyc management’s preliminary estimates. The following table presents the results of these analyses on a blended range basis:

 

      % Contribution
FY 2008E – FY 2011E
    Implied % of Equity
Based on Hologic
Current Trading
Multiples
Without Synergies
FY 2008E – FY 2011E
    Implied % of Equity
Based on Hologic
Current Trading
Multiples
With Synergies
FY 2008E – FY 2011E
 
     High     Low     High     Low     High     Low  

EBITDA

            

Hologic

   36.9 %   27.1 %   53.6 %   35.5 %   50.7 %   34.2 %

Cytyc

   72.9 %   63.1 %   64.5 %   46.4 %   65.8 %   49.3 %

Cash Net Income

            

Hologic

   45.0 %   30.0 %   58.9 %   34.8 %   55.1 %   33.5 %

Cytyc

   70.0 %   55.0 %   65.2 %   41.1 %   66.5 %   44.9 %

The above analysis assumes equivalent multiples are applied to both Hologic and Cytyc. Goldman Sachs derived the implied equity value of the pro forma company by adjusting Cytyc’s implied enterprise value for transaction debt of $2.286 billion and cash of $42 million. Each analyses also assumes that Hologic’s equity value was $3.283 billion as of May 18, 2007, that Hologic completes a small, pending private acquisition and assumes the pro forma capital structure as applied to Cytyc, which would result in an after tax pro forma interest expense deduction to Cytyc cash net income.

Pro Forma Analysis

Pro Forma Accretion/Dilution Analysis. Goldman Sachs compared, for each of the years 2008 and 2009, the forecast earnings per share, referred to as EPS, of Hologic, on a cash EPS and GAAP EPS standalone basis, in relation to the estimated GAAP EPS and the estimated cash EPS of the combined company, with and without synergies. In connection with the analysis, Goldman Sachs used EPS estimates under the forecast alternatives prepared by Hologic management and EPS estimates provided by Cytyc management. Goldman Sachs considered the potential cost synergies, based on Hologic management and Cytyc management preliminary estimates, and the 2008 figures included a $10 million management retention expense as provided by Hologic management. The analysis indicated that, while the transaction would be meaningfully dilutive on a GAAP basis, it would be accretive on a cash EPS basis taking into account synergies. In addition, such analysis was based on preliminary purchase accounting assumptions reviewed with Goldman Sachs by Hologic management.

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 analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after

 

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considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Hologic or the contemplated transaction.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its opinion to the Hologic board of directors that, as of May 20, 2007 and based upon and subject to the assumptions, procedures, factors, limitations and qualifications set forth in such opinion, the merger consideration to be paid for each outstanding share of Cytyc common stock, taken in the aggregate, pursuant to the merger agreement was fair, from a financial point of view, to Hologic. These analyses do not purport to be appraisals nor do they 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 these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Hologic, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arm’s-length negotiations between Hologic and Cytyc and was approved by the Hologic board of directors. Goldman Sachs provided advice to Hologic during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Hologic or its board of directors or that any specific merger consideration constituted the only appropriate consideration for the merger.

As described above, the opinion of Goldman Sachs to the Hologic board of directors was one of many factors taken into consideration by the Hologic board of directors in making its determination to approve the transaction. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex C.

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as financial advisor to Hologic in connection with, and has participated in certain of the negotiations leading to, the transaction contemplated by the merger agreement. In addition, Goldman Sachs has provided certain investment banking services to Hologic and Cytyc from time to time, for which Goldman Sachs has received, and may receive, compensation. Goldman Sachs also may provide investment banking services to Hologic in the future for which Goldman Sachs may receive compensation. In addition, Goldman Sachs expects that it and its affiliates will arrange and/or provide financing to Hologic specifically in connection with the transaction for additional compensation.

Goldman Sachs is a full service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such services to Hologic, Cytyc and their respective affiliates, may actively trade the debt and equity securities (or related derivative securities) of Hologic and Cytyc for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities.

The Hologic board of directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the contemplated transaction. Pursuant to a letter agreement, dated May 8, 2007, Hologic engaged Goldman Sachs to act as its financial advisor in connection with the transaction. Pursuant to the terms of this letter agreement, Hologic has agreed to pay Goldman Sachs a transaction fee of $16 million upon completion of the merger.

 

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In addition, Hologic has agreed to reimburse Goldman Sachs’ expenses incurred in connection with this engagement and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Opinion of Jefferies. Jefferies was engaged to render an opinion to Hologic’s board of directors as to whether the merger consideration to be paid by Hologic pursuant to the merger agreement is fair, from a financial point of view, to Hologic. On May 19, 2007, Jefferies delivered to the Hologic board of directors its oral opinion, subsequently confirmed in writing, that, as of the date of its opinion, based upon and subject to the assumptions, limitations, qualifications and factors contained in its opinion, the merger consideration to be paid by Hologic pursuant to the merger agreement is fair, from a financial point of view, to Hologic.

The full text of the written opinion of Jefferies is attached to this joint proxy statement/prospectus as Annex D and incorporated into this joint proxy statement/prospectus by reference. We urge you to read that opinion carefully and in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review undertaken in arriving at that opinion.

Jefferies’ opinion is for the use and benefit of the Hologic board of directors in its consideration of the merger, and Jefferies’ opinion does not address the relative merits of the transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to Hologic, nor does it address the underlying business decision by Hologic to engage in the merger or the terms of the merger agreement or the documents referred to therein. Jefferies’ opinion does not constitute a recommendation as to how any holder of shares of Hologic common stock should vote on the merger or any matter related thereto. In addition, Hologic did not ask Jefferies to address, and Jefferies’ opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of Hologic. Jefferies expresses no opinion as to the price at which shares of Hologic common stock would trade at any time.

In arriving at its opinion, Jefferies, among other things:

 

  (i) reviewed a draft dated May 19, 2007 of the merger agreement;

 

  (ii) reviewed certain publicly available financial and other information about Hologic and Cytyc;

 

  (iii) reviewed certain information furnished to Jefferies by Hologic’s management, including financial forecasts and analyses, relating to the business, operations and prospects of Hologic;

 

  (iv) reviewed certain information furnished to Jefferies by Cytyc’s management and Hologic’s management, including financial forecasts and analyses, relating to the business, operations and prospects of Cytyc;

 

  (v) held discussions with members of senior management of Hologic concerning the matters described in clauses (ii), (iii) and (iv) above;

 

  (vi) held discussions with members of senior management of Cytyc concerning the matters described in clause (ii) and (iv) above;

 

  (vii) reviewed certain publicly available information, including share trading price history and valuation multiples, of certain publicly traded companies that Jefferies deemed comparable to Cytyc;

 

  (viii) compared the proposed financial terms of the merger with the financial terms of certain other transactions that Jefferies deemed relevant; and

 

  (ix) conducted such other financial studies, analyses, and investigations as Jefferies deemed appropriate.

In Jefferies’ review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by Hologic or Cytyc or that was publicly available to Jefferies, or that was

 

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otherwise reviewed by Jefferies. In Jefferies’ review, Jefferies did not obtain any independent evaluation or appraisal of any of the assets or liabilities of, nor did Jefferies conduct a physical inspection of any of the properties or facilities of Hologic or Cytyc, nor was Jefferies furnished with any such evaluations or appraisals of such physical inspections, nor does Jefferies have any responsibility to obtain any such evaluations or appraisals.

With respect to the financial forecasts provided to and examined by Jefferies, Jefferies notes that projecting future results of Hologic and Cytyc is inherently subject to uncertainty. Hologic and Cytyc informed Jefferies, and Jefferies assumed, that such financial forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Hologic and Cytyc as to the future financial performance of Hologic and Cytyc, respectively. Jefferies expresses no opinion as to such financial forecasts or the assumptions on which they were made.

Jefferies made no independent investigation of any legal or accounting matters affecting Hologic or Cytyc, and assumed the correctness in all respects material to Hologic’s analysis of all legal and accounting advice given to Hologic and its board of directors, including, without limitation, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated by, the merger agreement to Hologic and its stockholders. In addition, in preparing its opinion, Jefferies did not take into account any tax consequences of the transaction to Hologic. Jefferies assumed that the final form of the merger agreement would be substantially similar to the last draft reviewed by Jefferies. Jefferies also assumed that in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Hologic, Cytyc or the contemplated benefits of the merger.

Jefferies’ opinion was based on economic, monetary, regulatory, market and other conditions existing and that could be evaluated as of the date of its opinion. Jefferies has no obligation to advise any person of any change in any fact or matter affecting its opinion of which Jefferies may have become aware of or of which Jefferies could become aware after the date of its opinion.

The following is a brief summary of the analyses performed by Jefferies in connection with its opinion. This summary is not intended to be an exhaustive description of the analyses performed by Jefferies but includes all material factors considered by Jefferies in rendering its opinion. Jefferies drew no specific conclusions from any individual analysis, but subjectively factored its observations from all of these analyses into its qualitative assessment of the merger consideration. Each analysis performed by Jefferies is a common methodology utilized in determining valuations. Although other valuation techniques may exist, Jefferies believes that the analyses described below, when taken as a whole, provide the most appropriate analyses for Jefferies to arrive at its opinion.

Comparable Public Company Analysis

Jefferies utilized comparable public company analysis, which values a target company by reference to publicly-traded companies with similar products, similar operating and financial characteristics and similar markets. Jefferies reviewed and compared selected financial data for six publicly traded companies chosen by Jefferies that were deemed to be comparable to Cytyc based on similar market capitalizations; revenue growth rates; gross margins and EBITDA (earnings before interest, taxes, depreciation and amortization) margins; similar business models; and participation in similar, high-growth medical device markets. The comparable companies chosen by Jefferies included:

 

Digene Corporation   Meridian Bioscience, Inc.
Gen-Probe Incorporated   Quidel Corporation
Inverness Medical Innovations, Inc.   Ventana Medical Systems, Inc.

 

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For each of the comparable companies, Jefferies calculated the ratios of the company’s total enterprise value (“TEV”) as of May 18, 2007 to analyst estimates of that company’s 2007 EBITDA. TEV was calculated as market capitalization, plus total debt, less cash and cash equivalents. Jefferies also calculated price-to-earnings ratio for each comparable company by dividing each company’s respective closing stock price on May 18, 2007 by (i) consensus analyst estimates of that company’s 2007 and 2008 GAAP earnings per share (“EPS”), including the impact of stock option expenses, and (ii) analyst estimates of that company’s 2007 and 2008 cash EPS, including the impact of stock option expenses. Jefferies used information available in publicly available research reports for estimated EBITDA, estimated GAAP EPS and estimated cash EPS.

Jefferies next calculated the corresponding implied multiples for Cytyc in the merger on the same basis, but defining equity market capitalization (for purposes of calculating TEV) as the $46.46 proposed per share merger consideration multiplied by the sum of the number of diluted shares outstanding plus the additional shares that would be issued upon conversion of convertible notes. Such calculations consisted of the ratios of Cytyc’s TEV (based on the $46.46 proposed per share merger consideration) to Hologic management’s projections of Cytyc EBITDA for the current fiscal year ending December 31, 2007. In addition, Jefferies calculated price-to-earnings ratios based on the $46.46 proposed per share merger consideration to (i) Hologic management’s projections of Cytyc GAAP earnings per share and cash earnings per share for the current fiscal year ending December 31, 2007; and (ii) Hologic management’s projections of Cytyc GAAP earnings per share and cash earnings per share for the next full fiscal year ending December 31, 2008. Jefferies then compared such implied multiples for Cytyc in the merger to the multiples for the comparable companies.

The resulting multiples and implied multiples are set forth in the table below:

 

Comparable Companies

 

High

Comparable

Multiple

 

Low

Comparable

Multiple

  Mean
Comparable
Multiple
  Median
Comparable
Multiple
  Implied
Multiple
Cytyc at
$46.46

1) Multiple of TEV/2007E EBITDA

  29.6x   12.3x   18.4x   18.2x   19.0x

2) Multiple of Price/2007E GAAP Earnings

  49.7x   23.0x   36.2x   36.8x   33.7x

3) Multiple of Price/2007E Cash Earnings

  38.0x   22.1x   32.0x   34.5x   31.3x

4) Multiple of Price/2008E GAAP Earnings

  34.3x   18.6x   26.0x   27.9x   26.1x

5) Multiple of Price/2008E Cash Earnings

  33.4x   16.0x   24.7x   27.7x   24.2x

No company utilized in the comparable public company analysis is identical to Cytyc. Jefferies made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of Cytyc. Mathematical analysis of comparable public companies (such as determining means and medians) in isolation from other analyses is not an effective method of evaluating transactions.

 

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Comparable Transaction Analysis

Jefferies utilized comparable transaction analysis, a method of valuing a business relative to recent merger and acquisition transactions involving similar businesses. Jefferies analyzed eleven previous outright acquisitions of small- and mid-cap public target companies and emerging growth private target companies with one or more of the following characteristics: market leader in high-growth niches of medical technology; focus on diagnostics and women’s health; and strong strategic fit with the acquirer based on similar physician call point/complementary products. The comparable transactions chosen by Jefferies included:

 

Announcement Date

  

Acquirer

  

Target

April 4, 2007    Inverness Medical Innovations, Inc.    Biosite, Inc.
February 12, 2007    Cytyc Corporation    Adeza Biomedical Corp.
January 5, 2007    Advanced Medical Optics Inc.    IntraLase Corp.
August 14, 2006    Becton, Dickinson and Company    TriPath Imaging, Inc.
June 5, 2006    American Medical Systems Holdings    Laserscope
April 17, 2006    Hologic, Inc.    Suros Surgical Systems, Inc.
November 14, 2005    Allergan, Inc.    Inamed Corporation
March 18, 2005    Siemens Medical Solutions USA, Inc.    CTI Molecular Imaging, Inc.
February 9, 2005    Cytyc Corporation    Proxima Therapeutics, Inc.
November 9, 2004    Advanced Medical Optics, Inc.    VISX, Inc.
March 1, 2004    Cytyc Corporation    Novacept, Inc.

For each of these transactions, Jefferies initially calculated the ratios of the TEV of the transaction (based on the acquisition price) to the target company’s EBITDA for the latest twelve month period (“LTM”) ended on the last day of the period covered by the target company’s Form 10-K or Form 10-Q, as applicable, last filed prior to the announcement of the relevant transaction. In calculating such ratios, Jefferies calculated TEV of the transaction as the market value of the relevant target company’s equity securities plus its indebtedness and minority interests less its cash and cash equivalents.

Jefferies also calculated the ratios of the total equity value in each comparable transaction to (i) estimates of GAAP earnings and cash earnings for the target company’s then current fiscal year and (ii) the target company’s next full fiscal year. The estimates used by Jefferies for each target company’s forward earnings were available in publicly available research reports.

Jefferies next calculated corresponding implied multiples for Cytyc in the Merger. Such calculations consisted of the ratio of Cytyc’s TEV (based on the $46.46 proposed per share merger consideration) to Cytyc’s EBITDA from March 31, 2006 to March 31, 2007. In addition, Jefferies calculated price-to-earnings ratios based on the $46.46 proposed per share merger consideration to (i) Hologic management’s projections of Cytyc GAAP earnings and cash earnings for the current fiscal year ending December 31, 2007; and (ii) Hologic management’s projections of Cytyc GAAP earnings and cash earnings for the next full fiscal year ending December 31, 2008. Jefferies then compared such implied multiples for Cytyc in the merger to the multiples for the precedent transactions.

 

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The following table sets forth Jefferies’ analysis:

 

Comparable Transactions

  

High

Comparable

Multiple

  

Low

Comparable

Multiple

  

Mean

Comparable
Multiple

   Median
Comparable
Multiple
   Implied
Multiple
Cytyc at
$46.46

Multiple of TEV /LTM EBITDA

   29.4x    10.8x    22.5x    24.6x    24.5x

Multiple of Price/1-Year Forward Cytyc GAAP Earnings (12/31/07)

   44.0x    32.8x    37.5x    36.8x    33.7x

Multiple of Price/1-Year Forward Cytyc Cash Earnings (12/31/07)

   41.4x    33.7x    36.8x    35.9x    31.3x

Multiple of Price/2-Year Forward Cytyc GAAP Earnings (12/31/08)

   36.6x    28.1x    31.8x    30.9x    26.1x

Multiple of Price/2-Year Forward Cytyc Cash Earnings (12/31/08)

   35.7x    26.7x    30.6x    30.6x    24.2x

The transactions utilized in the comparable transaction analysis are not identical to the merger. In evaluating the transactions, Jefferies made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of either Hologic or Cytyc. Mathematical analysis of comparable transaction data in isolation from other analyses is not an effective method of evaluating transactions.

Discounted Cash Flow Analysis

Jefferies utilized discounted cash flow analysis, which values a company as the sum of its unlevered (before financing costs) free cash flows over a forecast period and the company’s terminal or residual value at the end of the forecast period. Jefferies examined the value of Cytyc based on projected free cash flow estimates, which were generated utilizing financial projections from June 30, 2007 through September 30, 2012 that were provided by Cytyc management and revised by Hologic management. A range of terminal values at September 30, 2011 was determined based on free cash flow in 2012 and applying perpetual growth rates from 5.0% to 6.0%, and discount rates of 11.5% to 12.5%. Jefferies selected its range of perpetual growth rates (5.0% - 6.0%) based on an average of growth rates over the long-term, which Jefferies deemed appropriate in light of projected above average growth in the near- and medium-term and an eventual maturing of the growth of free cash flows over the long-term.

Jefferies selected discount rates of 11.5% - 12.5% based on the Capital Asset Pricing Model, using a target capital structure for Cytyc. Based on the selected range of perpetual growth rates (5.0% - 6.0%) and discount rates (11.5% - 12.5%), Jefferies calculated implied Cytyc equity values per share ranging from $42.39 to $56.96 per share.

While discounted cash flow analysis is a widely accepted and practiced valuation methodology, it relies on a number of assumptions, including growth rates and discount rates. The valuation derived from the discounted cash flow analysis is not necessarily indicative of Cytyc’s present or future value or results. Discounted cash flow analysis in isolation from other analyses is not an effective method of evaluating transactions.

Premiums Paid Analysis

Jefferies utilized premiums paid analysis, a method of valuing a target business by analyzing the premiums paid in selected merger and acquisition transactions. Using publicly available information, Jefferies conducted premiums paid analysis of 24 change of control transactions involving target companies in the medical device industry announced since January 13, 2004.

 

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For each of the target companies involved in the 24 transactions, Jefferies examined the closing stock price one day prior to announcement of the relevant transaction in order to calculate the mean, median, minimum and maximum premiums paid by the acquirer over the target company’s closing stock price at those points in time. Jefferies then compared those premiums to the premium implied by the $46.46 proposed merger consideration over Cytyc’s undisturbed stock price of $35.05 on May 18, 2007, the date one trading day prior to the announcement of the merger. A summary of the one day premiums observed in this premiums paid analysis is set forth in the table below:

 

Premiums Paid

   1-Day  

Mean

   33.0 %

Median

   25.3 %

Maximum

   120.8 %

Minimum

   5.1 %

Proposed Merger Consideration (Cytyc)

   32.6 %

Conclusion

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. In arriving at its opinion, Jefferies considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered by it. Furthermore, Jefferies believes that selecting any portion of its analysis, without considering all analyses, would create an incomplete view of the process underlying its opinion.

In performing its analyses, Jefferies made numerous assumptions with respect to industry performance, and general business and economic conditions and other matters, many of which are beyond the control of Hologic and Cytyc. The analyses performed by Jefferies are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. Jefferies did not recommend any specific consideration to the Hologic board of directors or that any specific consideration constituted the only appropriate consideration with respect to the merger agreement and the transactions contemplated thereby, including the merger.

Miscellaneous

Pursuant to an engagement letter dated May 15, 2007, the Hologic board of directors agreed to cause Hologic to pay Jefferies a fee in connection with rendering its opinion to the Hologic board of directors that is customary for transactions similar to the merger, and such fee was paid upon delivery of Jefferies’ opinion. The Hologic board of directors also agreed to cause Hologic to reimburse Jefferies for its expenses incurred in connection with rendering its opinion to the Hologic board of directors and to indemnify Jefferies against liabilities arising out of or in connection with the services rendered by Jefferies in connection to its engagement by the Hologic board of directors.

Jefferies maintains a market in Hologic securities and, in the ordinary course of business, Jefferies and its affiliates may trade or hold such securities for their own account and the accounts of their customers and, accordingly, may at any time hold long or short positions in those securities. Jefferies may seek to, in the future, provide financial advisory and financing services to Hologic or entities that are affiliated with Hologic, for which Jefferies would expect to receive compensation.

Interests of Hologic Executive Officers and Directors in the Merger

In considering the recommendation of the Hologic board of directors with respect to the merger, Hologic stockholders should be aware that certain executive officers of Hologic and members of the Hologic board of directors may have interests in the transactions contemplated by the merger agreement that are different than, or

 

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in addition to, the interests of the Hologic stockholders generally. The Hologic board of directors was aware of these interests and considered them, among other matters, in approving the merger and making its recommendation. These interests are summarized below.

Payments and Consideration to Executive Officers and Directors in Connection with the Merger.

Change of Control Agreements; Waivers. Each of Mr. John W. Cumming, Hologic’s current chairman and chief executive officer, Mr. Glenn P. Muir, Hologic’s current chief financial officer, Mr. Robert A. Cascella, Hologic’s current president and chief operating officer, and Dr. Jay A. Stein, Hologic’s current chairman emeritus and chief technical officer, have change of control agreements with Hologic, which provide that such officers are entitled to receive certain payments and benefits in connection with a change of control of Hologic. In addition, certain stock options and restricted stock unit award agreements for each of these officers provide that the officer’s unvested options and restricted stock units accelerate upon a change of control, except for restricted stock unit awards granted as a part of such officer’s existing retention and severance agreements.

In connection with entering into the merger agreement, each of Messrs. Cumming, Muir and Cascella agreed to waive, solely with respect to the change of control resulting from the merger, the change of control payment and special bonus they would have been entitled to receive under their respective change of control agreements and any accelerated vesting of the stock options and restricted stock units that were entitled to fully vest in connection with the merger. Each officer’s waiver provides that if such officer is terminated by Hologic other than for cause or if the officer resigns for good reason before the second anniversary of the merger then the waiver is rescinded. In connection with any rescission of the waiver, a change of control is deemed to have occurred at the effective time of the merger and the officer is entitled to receive all payments and benefits under his change of control agreement and all unvested options and restricted stock units that absent such waiver would have vested at the effective time of the merger shall become vested. These waivers do not apply to any change of control that may occur with respect to Hologic other than the merger. The following table sets forth the payments and other benefits that each of Messrs. Cumming, Muir and Cascella have conditionally waived under their respective change of control agreements that would become payable if their employment were terminated within two years of the effective date of the merger under the circumstances described above.

 

Name and Principal Position

  Cash
Change in
Control
Payment
($)(1)
 

Special
Bonus($)

(2)($)

  Number of
Unvested
Options
that Would
Vest and
Become
Exercisable
(#)(3)
  Value of
Unvested
Options
that Would
Vest and
Become
Exercisable
($)(4)
  Number
of
Unvested
Restricted
Stock
Units that
Would
Vest(3)
  Value of
Unvested
Restricted
Stock
Units that
Would
Vest ($)(4)
  Estimated
Aggregate
Dollar
Value
($)(5)

John W. Cumming

Chairman and Chief

Executive Officer

  3,825,000   1,275,000   60,000   2,872,500   5,176   284,680   8,257,180

Robert A. Cascella

President and Chief

Operating Officer

  2,812,500   937,500   35,000   1,675,625   3,623   199,265   5,624,890

Glenn P. Muir

Executive Vice President,

Finance and Administration,

Chief Financial Officer

  2,325,000   775,000   35,000   1,675,625   3,106   170,830   4,946,555

(1) Represents a lump sum payment in cash equal to the sum of the executive’s annual base salary for fiscal 2007 plus the executive’s highest annual bonus (as defined in the officer’s change of control agreement), multiplied by three.

 

(2) Represents the sum of the executive’s annual base salary plus the executive’s highest annual bonus.

 

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(3) All unvested stock options and restricted stock units, other than those restricted stock units issued in connection with the officer’s retention and severance agreement, would vest in connection with a change of control. More detail relating to the number and exercise price of such stock options is as follows (assuming the merger has a closing date of October 18, 2007, the date of the Hologic special meeting):

 

   

John W. Cumming: 60,000 options with an exercise price of $7.125 per share.

 

   

Robert A. Cascella: 35,000 options with an exercise price of $7.125 per share.

 

   

Glenn P. Muir: 35,000 options with an exercise price of $7.125 per share.

 

(4) For purposes of the table set forth above, values are calculated (i) with respect to restricted stock units, by assuming that Hologic’s common stock price at the effective time of the merger is $55.00 per share and (ii) with respect to stock options, by subtracting the exercise price of the applicable stock option from the assumed $55.00 per share stock price of Hologic’s common stock at the effective time of the merger.

 

(5) Amounts do not reflect any additional amounts paid to the executive which are necessary to pay any excise tax imposed upon the executive’s change of control payments and benefits pursuant to Section 4999 of the Code.

Under the terms of Dr. Stein’s change of control agreement he is entitled to a change of control payment in the amount of $1,800,000, which is equal to his base salary plus his highest annual bonus (as defined in his change of control agreement), multiplied by three. As a result of the merger, Dr. Stein will also be immediately vested in outstanding, unvested stock options to purchase 10,000 shares of Hologic common stock (having a value of $478,750, calculated by subtracting the exercise price of the stock options from an assumed $55.00 per share stock price of Hologic’s common stock price at the effective time of the merger) and 2,070 restricted stock units representing shares of Hologic common stock (having a value of $113,850, calculated by assuming that Hologic’s common stock price at the effective time of the merger is $55.00 per share). In addition, on the one year anniversary of the merger, Dr. Stein is entitled to receive a special bonus if he remains employed by Hologic. The special one time bonus is $600,000, which is equal to his then base salary plus his highest annual bonus. If Dr. Stein is terminated without cause or resigns for good reason prior to the one year anniversary of the merger, then Hologic is obligated to pay him the special bonus within thirty days of the termination date. Hologic is also obligated to gross up the amount paid Dr. Stein for excise taxes, if any, arising under Section 280G of the Code.

Non-Continuing Directors of Hologic. The compensation committee of the board of directors of Hologic approved certain benefits to be received at the effective time of the merger by those current independent directors of Hologic who will not continue as directors of Hologic following the merger. As of the date of this joint proxy statement/prospectus, the current independent directors of Hologic who will continue to serve as directors of Hologic following the merger have not been determined. Accordingly, the information provided below has been provided for each of the current independent directors of Hologic.

 

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Stock Options Held by Non-Continuing Hologic Directors. Stock options to purchase shares of Hologic’s common stock held by independent directors who will not continue as directors of Hologic following the merger will vest and become fully exercisable upon the effective time of the merger and will remain exercisable until December 2009. The table below sets forth the name of each current Hologic director and the number of options that would vest assuming a closing date of October 18, 2007 and further assuming that individual did not continue as a director of Hologic after the merger:

 

Name

  

Number of Shares Underlying Stock

Options that will Vest in connection
with the Merger

Laurie Fajardo(1)

   46,000

Irwin Jacobs(2)

   8,000

David LaVance, Jr.(3)

   8,000

Arthur Lerner(4)

   38,000

Nancy Leaming(5)

   18,000

Lawrence M. Levy(6)

   36,000

(1) Consists of options to purchase 6,000 shares with an exercise price of $47.28; and options to purchase 40,000 shares with an exercise price of $48.17.

 

(2) Consists of options to purchase 2,000 shares with an exercise price of $37.92; and options to purchase 6,000 shares with an exercise price of $47.28.

 

(3) Consists of options to purchase 2,000 shares with an exercise price of $37.92; and options to purchase 6,000 shares with an exercise price of $47.28.

 

(4) Consists of options to purchase 30,000 shares with an exercise price of $18.475; options to purchase 2,000 shares with an exercise price of $37.92; and options to purchase 6,000 shares with an exercise price of $47.28.

 

(5) Consists of options to purchase 10,000 shares with an exercise price of $6.80; options to purchase 2,000 shares with an exercise price of $37.92; and options to purchase 6,000 shares with an exercise price of $47.28.

 

(6) Consists of options to purchase 30,000 shares with an exercise price of $35.68; and options to purchase 6,000 shares with an exercise price of $47.28.

 

   

Director Fees for Non-Continuing Directors. The compensation committee of the board of directors of Hologic also determined to accelerate the annual fees that otherwise would have been payable through March 2008 to those independent directors of Hologic who will not continue as directors after the merger. Accordingly, upon the effective time of the merger, each independent director of Hologic who will not continue as a director of Hologic following the merger will be entitled to receive the full amount of any unpaid annual fees payable through March 2008 to Hologic’s directors. The total amount of the annual fee payable to a director is $60,000 plus $7,500 for each chair of Hologic’s compensation, audit and corporate development committees. Assuming an effective time of the merger on October 18, 2007, the unpaid amounts that will be paid to each independent director of Hologic assuming such director does not continue as a director of Hologic following the merger is as follows: Ms. Fajardo: $15,000; Mr. Jacobs: $15,000; Mr. LaVance: $16,875; Dr. Lerner: $15,000; Ms. Leaming: $16,875; and Mr. Levy: $16,875.

Continuing Hologic Directors. As described under “Amendment to Hologic’s Second Amended and Restated 1999 Equity Incentive Plan,” each continuing Cytyc director that becomes an independent director of Hologic at the effective time of the merger will receive an automatic grant of options to purchase 50,000 shares of Hologic common stock pursuant to the terms of Hologic’s Second Amended and Restated 1999 Equity Incentive Plan. In

 

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connection with entering into the merger agreement, the parties agreed to treat all independent directors who will serve as directors of Hologic on the effective time of the merger similarly. Accordingly, subject to discretion and approval of the compensation committee of the board of directors of Hologic, it is expected that each continuing Hologic director who is an independent director will be granted options to purchase 50,000 shares of common stock of Hologic under Hologic’s Second Amended and Restated 1999 Equity Incentive Plan at the effective time of the merger.

The options to purchase 50,000 shares of Hologic common stock to be granted to all independent directors of Hologic at the effective time of the merger will become exercisable in 20% installments beginning on January 1 of the first year after the grant date, and on January 1 of each year thereafter, until such options are fully exercisable on January 1 of the fifth year following the grant. If the continuing Hologic directors receive their discretionary grant of options to purchase 50,000 shares of Hologic common stock, they have agreed to forego their automatic grant of options to purchase 8,000 shares of Hologic common stock that they would have otherwise received on January 1, 2008 pursuant to the terms of Hologic’s Second Amended and Restated 1999 Equity Incentive Plan. The continuing Cytyc directors are not eligible for the automatic grant of options to purchase 8,000 shares under Hologic’s Second Amended and Restated 1999 Equity Incentive Plan because such persons would not have been serving as a Hologic director for a period of six months before January 1, 2008.

Retention and Severance Agreements. In connection with Mr. Cascella’s waiver described above, Hologic and Mr. Cascella also agreed to the principal terms of a three year retention agreement, which will become effective upon and is subject to the completion of the merger. Mr. Cascella’s existing retention and severance agreement entered into in May 2006, will also remain in effect following the merger. Under the terms of the new retention agreement, Mr. Cascella will be entitled to a retention bonus in the amount equal to approximately $2,000,000 payable 50% in cash and 50% in restricted stock units if he remains employed by Hologic for three years following the effective time of the merger. The payment will be accelerated if Hologic terminates Mr. Cascella without cause or if Mr. Cascella resigns for good reason prior to such date. Termination for cause requires that 75% of Hologic’s independent directors determine that cause exists.

Other than as described above, no other employment arrangements with any Hologic executive officer were amended in connection with the merger agreement.

Board and Committee Composition of the Combined Company. Certain members of the Hologic board of directors will continue as directors of the combined company. As of the effective time of the merger, the board of directors of Hologic will consist of eleven directors, six of whom will be designated by Hologic and five of whom will be designated by Cytyc. Four of the six persons designated by Hologic will be “independent” directors, as defined under applicable Nasdaq listing standards, and the remaining two persons will be John W. Cumming, current chairman and chief executive officer of Hologic, and Glenn P. Muir, current chief financial officer of Hologic.

Hologic’s audit, nominating and corporate governance and corporate development committees following the merger will each consist of an odd number of directors, consisting of one more continuing Hologic director than continuing Cytyc directors. The chairman of each of these committees will be a continuing Hologic director. The compensation committee of Hologic following the merger will consist of an even number of directors, consisting of an equal number of continuing Cytyc directors and continuing Hologic directors. The chairman of the compensation committee will be a continuing Cytyc director. See “—Board of Directors and Management of Hologic Following the Merger; Headquarters” beginning on page 105.

Indemnification of Officers and Directors. In connection with entering into the merger agreement, Hologic’s board of directors approved an amendment to the indemnification provisions contained in Hologic bylaws. Such amendment will become effective only upon the effective time of the merger. The amended Hologic bylaws provide that Hologic will indemnify any person who was or is or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative,

 

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by reason of the fact that he is or was a director or officer of Hologic or, while a director or officer of Hologic, is or was serving at the request of Hologic as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, where the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such person in connection with such proceeding. The amended bylaws also provide that Hologic will indemnify any person seeking indemnification in connection with a proceeding brought by that person only if the proceeding (or part thereof) was authorized by the Hologic board of directors. The current Hologic bylaws permit indemnification of officers and directors, but do not require Hologic to provide such persons with indemnification. Hologic has entered into indemnification agreements with each of its current directors and certain of its officers, which provide for mandatory indemnification, and has also agreed to enter into similar indemnification agreements with each of the directors of Cytyc who will become directors of Hologic at the effective time of the merger.

Cytyc Reasons for the Merger

At a meeting held on May 20, 2007, the Cytyc board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and fair to and in the best interests of the Cytyc stockholders and approved and adopted the merger agreement and the transactions contemplated thereby, including the merger. In evaluating the merger, the Cytyc board of directors consulted with Cytyc’s management, as well as with Cytyc’s legal and financial advisors. In reaching its conclusion to approve the merger agreement and the transactions contemplated thereby, the Cytyc board of directors considered a variety of factors weighing favorably towards the merger, including, without limitation, the material factors listed below:

 

   

Strategic Considerations. The Cytyc board of directors considered a number of factors pertaining to the strategic rationale for the merger as supporting its decision to enter into the merger agreement, including the following:

 

   

the fact that the merger is a combination of two companies that will provide a strong financial base and a diversified product portfolio in the increasingly competitive women’s healthcare marketplace;

 

   

the complementary aspects of the respective businesses of Cytyc and Hologic, creating the potential for the combined company to be a global leader in women’s healthcare; the combined company will offer a product portfolio that meets many of a woman’s screening and treatment needs throughout her life, including integrated solutions in screening, diagnostics and therapeutics for women’s health, including breast cancer, cervical cancer, menorrhagia, pre-natal health, osteoporosis, endometriosis and permanent contraception;

 

   

the combined company will be able to offer an expanded product portfolio with over 90% of its total revenue from products that are the leader in market share in the United States;

 

   

the combined company will have comprehensive sales coverage creating one of the largest sales and service organizations exclusively focused on women’s healthcare in the diagnostic and medical technology industry in the United States with over 900 sales and service professionals in the United States;

 

   

the combined company will provide significant cross-selling synergies;

 

   

the combined company will have an enhanced international presence with direct operations in over 20 countries and a commercial presence in over 125 countries worldwide; and

 

   

the Cytyc board of directors’ belief that the combined company will provide significantly greater capabilities and competitiveness than Cytyc currently has on its own, including:

 

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greater financial, research and development, and marketing resources to better serve its customers;

 

   

the acceleration of the introduction of new and improved products and services; and

 

   

greater ability to develop next-generation products and services.

 

   

Strategic Alternatives. The Cytyc board of directors considered the strategic alternatives to the merger available to Cytyc, including remaining a stand-alone entity and pursuing acquisitions of strategic assets and alternative acquisition candidates, and the determination of the Cytyc board of directors that a combination with Hologic is expected to yield greater strategic benefits than other reasonably likely alternatives because of the factors described above in “—Strategic Considerations.”

 

   

Financial Considerations. The Cytyc board of directors considered a number of financial factors pertaining to the merger as supporting its decision to enter into the merger agreement, including the following:

 

   

the financial performance and condition, business operations and prospects of each of Cytyc, Hologic and the combined company;

 

   

that Cytyc stockholders will own approximately 55% of the combined company’s outstanding shares immediately after the effective time of the merger (assuming conversion of all of Cytyc’s outstanding 2.25% Senior Convertible Notes due 2024), which will allow Cytyc stockholders to participate in all of the benefits of the combined company, including future growth and expected synergies of the combined company while retaining the flexibility of selling all or a portion of those shares for cash into a very liquid market at any time;

 

   

the financial terms of the transaction, including the fixed exchange rate of 0.52 of a share of Hologic common stock for each share of Cytyc common stock and the payment of $16.50 in cash per share of Cytyc common stock to be paid in connection with the merger. Based upon Hologic’s closing stock price of $57.61 per share on May 18, 2007 (the last trading day before the merger agreement was announced), the transaction represented a purchase price of $46.46 per share of Cytyc common stock or a 32.5% premium to the Cytyc common stock closing price on May 18, 2007 and representing premiums of 36.9%, 32.2%, 38.2%, 50.1% and 67.0% over the average closing share price during the 15-day, 1-month, 3-month, 6-month and 1-year periods ended May 18, 2007, respectively;

 

   

the expected merger benefits estimated to be more than $75 million in anticipated synergies primarily from cross-selling opportunities and $25 million in annual cost savings. See “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 47 and 26, respectively;

 

   

the opportunity for Cytyc stockholders to benefit from any increase in the trading of Hologic common stock between announcement of the merger and the closing of the merger;

 

   

the expectation that the merger would allow the combined company to generate significant cash flows;

 

   

the expectation that the merger would be accretive to the adjusted earnings per share of the combined company beginning in fiscal year 2008;

 

   

that the merger is expected to result in a 20% annual revenue growth rate and 20% growth rate in adjusted earnings per share (excluding the write-off and amortization of acquisition-related intangible assets and related tax effect) in future years; and

 

   

the fact that Hologic has secured fully committed debt financing for the approximately $2.2 billion cash portion of the merger consideration.

 

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Governance Considerations. The Cytyc board of directors considered a number of governance factors pertaining to the merger as supporting its decision to enter into the merger agreement, including the following:

 

   

the fact that the board of directors of the combined company would be comprised of eleven directors, including five designees from Cytyc (including the chief executive officer of Cytyc) and six designees from Hologic;

 

   

the fact that Patrick J. Sullivan will become chairman of the combined company;

 

   

the fact that, while the combined company’s headquarters would be located in Bedford, Massachusetts, the headquarters of the Cytyc business would continue to be located in Marlborough, Massachusetts; and

 

   

the strong management team to be drawn from both Cytyc and Hologic that will manage the combined company, the complementary cultural fit and organizational structure of both companies and the demonstrated ability of both management of Cytyc and management of Hologic to integrate and obtain benefits from previous business combinations.

 

   

Tax Considerations. The Cytyc board of directors considered the ability to complete the merger as a reorganization for U.S. federal income tax purposes with the Cytyc stockholders being taxed on an amount not to exceed the cash portion of the merger consideration that they receive.

 

   

Opinions of Financial Advisors. The Cytyc board of directors considered Morgan Stanley’s and JPMorgan’s separate opinions, each dated May 20, 2007, to Cytyc’s board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by Cytyc stockholders pursuant to the merger agreement, as more fully described in “—Opinions of Financial Advisors to the Cytyc Board of Directors” beginning on page 84.

 

   

Terms of the Merger Agreement. The Cytyc board of directors considered that the terms of the merger agreement are reasonable, including:

 

   

the merger agreement permits Cytyc to provide material non-public information to, and engage in negotiations with, a third party that makes an acquisition proposal that is or is reasonably likely to lead to a superior proposal (as described in “The Merger Agreement—Certain Covenants—No Solicitation” beginning on page 122), on the terms and subject to the conditions of the merger agreement;

 

   

the merger agreement provides Cytyc, under certain circumstances, with the ability to terminate the merger agreement in order to enter into an alternative transaction that is deemed by the directors of Cytyc to be a superior proposal;

 

   

the merger agreement permits the Cytyc board of directors, under certain circumstances, to change its recommendation with respect to the merger in response to a material development or change in circumstances occurring or arising after the date of execution of the merger agreement that was not known to the Cytyc board of directors as of, or prior to, the date of execution of the merger agreement, provided that the change or development is not, and does not result from, a change in the market price of the common stock of Hologic primarily as a result of the announcement of the merger agreement and the transactions contemplated thereby;

 

   

the circumstances under which the Cytyc termination fees are payable under the merger agreement and the view of the Cytyc board of directors that these provisions should not preclude a bona fide alternative proposal involving Cytyc;

 

   

the fact that the termination fee provisions are the product of negotiations;

 

   

the fact that the size of the termination fees are reasonable in light of the size and benefits of the merger;

 

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the circumstances under which the Hologic termination fees are payable to Cytyc under the merger agreement; and

 

   

the fact that the representations, warranties and covenants of Cytyc and Hologic are generally reciprocal.

 

   

Regulatory Approvals. The Cytyc board of directors considered the regulatory approvals required to complete the merger, including expiration or termination of any waiting period or extension thereof under the HSR Act, and the belief of Cytyc’s management that the merger would be approved by the requisite authorities, without the imposition of conditions sufficiently material to preclude or materially diminish the benefits expected from the merger, and would otherwise be completed in accordance with the terms of the merger agreement.

 

   

Due Diligence. The Cytyc board of directors considered the results of Cytyc’s due diligence review of Hologic.

The Cytyc board of directors weighed the aforementioned material factors against a number of other factors identified in its deliberations that weighted negatively against the merger, including, without limitation, the following material factors:

 

   

the challenges inherent in the combination of two businesses of the size and scope of Cytyc and Hologic and the possible diversion of management’s attention for an extended period of time;

 

   

the risk of not capturing all of the anticipated synergies between Cytyc and Hologic and the risk that other anticipated benefits of the merger might not be realized;

 

   

because the exchange ratio is fixed, in the event of a decrease in the price of Hologic common stock between the date of execution of the merger agreement and the closing of the merger, Cytyc stockholders may receive less value for their shares upon the closing of the merger than calculated pursuant to the exchange ratio on the date of execution of the merger agreement and on the date of the Cytyc special meeting;

 

   

certain provisions of the merger agreement that could have the effect of discouraging proposals for alternative transactions involving Cytyc, including:

 

   

the restrictions on Cytyc’s ability to solicit proposals for alternative transactions involving Cytyc; and

 

   

that Cytyc may be required to pay to Hologic a termination fee of either $50 million or $150 million depending upon the termination event;

 

   

the fees and expenses associated with completing the merger;

 

   

the risk that the merger may not be completed despite the parties’ efforts or that the closing may be unduly delayed and the effects on Cytyc as a stand-alone company because of such failure or delay; and

 

   

the other risks described in “Risk Factors” beginning on page 26.

After consideration of these factors, the Cytyc board of directors determined that these risks could be mitigated or managed by Cytyc or Hologic or by the combined company following the merger, were reasonably acceptable under the circumstances or, in light of the anticipated benefits, the risks were unlikely to have a materially adverse impact on the merger or on the combined company following the merger, and that, overall, these risks were significantly outweighed by the potential benefits of the merger.

Although this discussion of the information and factors considered by the Cytyc board of directors is believed to include the material factors considered by the Cytyc board of directors, it is not intended to be exhaustive and may not include all of the factors considered by the Cytyc board of directors. In reaching its determination to approve and recommend the merger and the merger agreement, the Cytyc board of directors did

 

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not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger and the merger agreement are advisable and fair to and in the best interests of Cytyc and its stockholders. Rather, the Cytyc board of directors based its position and recommendation on the totality of the information presented to and factors considered by it. In addition, individual members of the Cytyc board of directors may have given differing weights to different factors.

In considering the recommendation of the Cytyc board of directors with respect to the merger and the merger agreement, you should be aware that certain Cytyc directors and officers have arrangements that may cause them to have interests in the transaction that are different from, or are in addition to, the interests of Cytyc stockholders generally. See “—Interests of Cytyc Executive Officers and Directors in the Merger” beginning on page 95.

Recommendations of the Cytyc Board of Directors

The Cytyc board of directors has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of Cytyc and the Cytyc stockholders and unanimously recommends that the Cytyc stockholders vote “FOR” the proposal to adopt the merger agreement and the transactions contemplated thereby, including the merger, and “FOR” the proposal to adjourn the Cytyc special meeting, including, if necessary, to solicit additional proxies in favor of such adoption.

Opinions of Financial Advisors to the Cytyc Board of Directors

Cytyc has retained Morgan Stanley and JPMorgan as its financial advisors in connection with the merger.

On May 20, 2007, at a meeting of the Cytyc board of directors held to evaluate the proposed merger, Morgan Stanley and JPMorgan delivered to the Cytyc board of directors separate oral opinions, which opinions were confirmed by delivery of separate written opinions each dated May 20, 2007, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations described in such opinions, the merger consideration to be received by the holders of Cytyc common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

Morgan Stanley’s and JPMorgan’s opinions, the full texts of which describe the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Morgan Stanley and JPMorgan, are attached hereto as Annex E and Annex F, respectively, and are incorporated into this joint proxy statement/prospectus by reference. Morgan Stanley’s and JPMorgan’s opinions were directed only to the fairness, from a financial point of view, of the merger consideration provided for in the merger agreement and do not address any other aspect of the merger. The opinions do not address the relative merits of the merger as compared to other business strategies or transactions that might be available with respect to Cytyc or Cytyc’s underlying business decision to effect the merger. The opinions do not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger. Holders of Cytyc common stock are encouraged to read the opinions carefully in their entirety. The summaries of Morgan Stanley’s and JPMorgan’s opinions described below are qualified in their entirety by reference to the full texts of the opinions.

Opinion of Morgan Stanley. Cytyc retained Morgan Stanley to provide it with financial advisory services and a financial opinion in connection with a possible merger or sale of Cytyc. Morgan Stanley was selected by Cytyc to act as its financial advisor based on Morgan Stanley’s qualifications, expertise, reputation and its knowledge of the business and affairs of Cytyc. At the special meeting of Cytyc’s board of directors on May 20, 2007, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of May 20, 2007, based upon and subject to the various considerations set forth in the opinion, the merger consideration to be received by the holders of the Cytyc common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

 

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The full text of the written opinion of Morgan Stanley, dated as of May 20, 2007, is attached hereto as Annex E to this joint proxy statement/prospectus. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. You should read the entire opinion carefully. Morgan Stanley’s opinion is directed to Cytyc’s board of directors and addresses only the fairness of the consideration to be received by the holders of the Cytyc common stock pursuant to the merger agreement to such holders as of the date of the opinion. It does not address any other aspect of the merger and does not constitute a recommendation to the stockholders of Cytyc or Hologic as to how to vote at the stockholders meetings to be held in connection with the merger. The summary of the opinion of Morgan Stanley set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.

In connection with rendering its opinion, Morgan Stanley, among other things:

 

   

reviewed certain publicly available financial statements and other business and financial information of Cytyc and Hologic, respectively;

 

   

reviewed certain internal financial statements and other financial and operating data concerning Cytyc and Hologic, respectively;

 

   

reviewed certain financial projections prepared by the managements of Cytyc and Hologic, respectively;

 

   

discussed the past and current operations and financial condition and the prospects of Cytyc and Hologic, including information relating to certain strategic, financial and operational benefits anticipated from the merger, with senior executives of Cytyc and Hologic, respectively;

 

   

reviewed the reported prices and trading activity for the Cytyc common stock and the Hologic common stock;

 

   

reviewed the pro forma impact of the merger on Hologic’s earnings per share, cash flow, consolidated capitalization and financial ratios;

 

   

compared the financial performance of Cytyc and Hologic and the prices and trading activity of the Cytyc common stock and Hologic common stock with that of certain other comparable publicly-traded companies and their securities, respectively;

 

   

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

 

   

participated in discussions and negotiations among representatives of Cytyc and Hologic and certain other parties and their financial and legal advisors;

 

   

reviewed the merger agreement and certain related documents; and

 

   

performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by it for the purposes of its opinion. With respect to the financial projections, including information relating to certain strategic, financial and operational benefits anticipated from the merger, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of Cytyc and Hologic. In addition, Morgan Stanley assumed that the merger will be completed in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that the merger will be treated as a tax-free reorganization and/or exchange, each pursuant to the Code. Morgan Stanley relied upon, without independent verification, the assessment by the managements of Cytyc and Hologic

 

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of: (i) the strategic, financial and other benefits expected to result from the merger; (ii) the timing and risks associated with the integration of Cytyc and Hologic; (iii) their ability to retain key employees of Cytyc and Hologic, respectively; and (iv) the validity of and risks associated with Cytyc and Hologic’s existing and future technologies, intellectual property, products, services and business models. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Hologic and Cytyc, and their legal, tax or regulatory advisors with respect to such matters. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Cytyc, nor was it furnished with any such appraisals. Morgan Stanley’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to it as of the date of the opinion. Events occurring after the date of the opinion may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.

In arriving at its opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to the acquisition, business combination or other extraordinary transaction, involving Cytyc or any of its assets, nor did Morgan Stanley negotiate with any party other than Hologic.

Summary of Certain Financial Analyses Conducted by Morgan Stanley

The following is a brief summary of the material analyses performed by Morgan Stanley in connection with its opinion dated May 20, 2007. This summary of financial analyses includes information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses.

Equity Research Analyst Price Targets Analysis

Morgan Stanley reviewed and analyzed future public market trading price targets for Cytyc common stock prepared and published by equity research analysts. These targets reflect each analyst’s estimate of the future public market trading price of Cytyc common stock. Morgan Stanley noted that the range of equity analyst price targets of Cytyc common stock was between $37.00 and $42.00 per share. Morgan Stanley further calculated that using a discount rate of 8.5% and a discount period of one year, the present value of the equity analyst price target range was $34.10 to $38.71.

The public market trading price targets published by securities research analysts do not necessarily reflect current market trading prices for Cytyc common stock and these estimates are subject to uncertainties, including the future financial performance of Cytyc and future financial market conditions.

Comparable Company Analysis

Morgan Stanley compared selected financial information for Cytyc with publicly available information for comparable healthcare companies that shared similar characteristics with Cytyc. The companies used in this comparison included those companies listed below:

 

   

American Medical Systems Holdings Inc.

 

   

Gen-Probe Inc.

 

   

ArthroCare Corp.

 

   

Ventana Medical Systems Inc.

 

   

Immucor Inc.

 

   

Digene Corp.

 

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Based upon IBES consensus estimates for calendar year 2008 earnings per share and long-term growth of earnings per share, and using the closing prices as of May 18, 2007 for shares of the comparable companies listed above, Morgan Stanley calculated the following ratios for each of these companies:

 

   

the closing stock price divided by the estimated IBES consensus earnings per share for calendar year 2008, referred to below as the P/E Multiple; and

 

   

the P/E Multiple divided by the estimated IBES consensus long-term growth rate of earnings per share, referred to below as the P/E/G Ratio.

Based on the analysis of the relevant metrics for each of the comparable companies, Morgan Stanley selected representative ranges of P/E Multiples and P/E/G Ratios for the comparable companies and applied these ranges to the relevant Cytyc financial statistic(s) as provided by Cytyc management and publicly available information. Based on this analysis, Morgan Stanley calculated the implied value per share of Cytyc common stock as of May 18, 2007, as follows:

 

Financial Metric

  

Cytyc

Calendar Year

2008 EPS

  

Cytyc IBES

Consensus Long-Term

Growth

   

Comparable

Company Multiple

Statistics

  

Implied Value Per

Share Range for

Cytyc

P/E Multiple

   $ 1.64    NA     20.0x - 28.0x    $ 32.88 - $46.03

P/E/G Ratio

   $ 1.64    17.0 %   0.7x - 1.0x    $ 19.56 - $27.95

No company included in the comparable company analysis is identical to Cytyc. In evaluating the comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of Cytyc, such as the impact of competition on the business of Cytyc and the industry in general, industry growth and the absence of any material adverse change in the financial condition and prospects of Cytyc or the industry or in the financial markets in general. Mathematical analysis, such as determining the arithmetic mean or median, or the high or low, is not in itself a meaningful method of using comparable company data.

Analysis of Precedent Transactions

Morgan Stanley compared the premia paid in 57 selected transactions from January 1, 2002 through May 16, 2007 in which the target company was a U.S. based company and was publicly traded. The following table summarizes Morgan Stanley’s analysis:

 

Precedent Transactions Premia

   Premium to 1-Day Prior Price   Premium to 4-Weeks Prior Price

Mean

   19.5%   25.6%

Median

   15.6%   24.5%

High

   75.4%   74.8%

Low

   (4.6)%         (1.2)%      

Representative Range

   10.0% - 30.0%   25.0% - 40.0%

Implied Value per Share

   $38.56 - $45.57   $43.85 - $49.11

Discounted Cash Flow Analysis

Morgan Stanley calculated ranges of implied equity values per share for Cytyc, based on discounted cash flow analyses utilizing Cytyc management projections for the calendar years 2007 through 2017. In arriving at the estimated equity values per share of Cytyc common stock, Morgan Stanley calculated a terminal value as of December 31, 2017 by applying a range of perpetual free cash flow growth rates ranging from 1.0% to 3.0%. The unlevered free cash flows from calendar years 2007 through 2017 and the terminal value were then discounted to present values using a range of discount rates from 8.0% to 9.0%. Based on the calculations set forth above, this analysis implied a range for Cytyc common stock of $33.10 to $45.42 per share.

 

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Morgan Stanley also calculated ranges of implied value per share to be received by Cytyc stockholders in exchange for their Cytyc common stock in the form of shares of the pro forma combined entity plus cash consideration per share. This calculation was based on a discounted cash flow analysis utilizing Cytyc’s management projections discussed above, and projections relating to Hologic prepared by Cytyc management for the fiscal years 2007 through 2017, each ending September 30. In calculating the implied value per share to be received by Cytyc stockholders in exchange for their Cytyc common stock in the form of shares of the pro forma combined entity plus cash consideration, Morgan Stanley calculated a terminal value as of September 30, 2017 by applying a range of perpetual free cash flow growth rates from 2.5% to 3.5%. The pro forma unlevered free cash flows from fiscal years 2007 through 2017 and the terminal value were then discounted to present values using a range of discount rates from 8.0% to 9.0%. Morgan Stanley noted the range of implied value per share to be received by Cytyc stockholders assuming the 0.52 exchange ratio plus $16.50 in cash per share of Cytyc common stock was $38.96 to $50.24.

Morgan Stanley also noted the range of implied value per share to be received by Cytyc stockholders in exchange for their Cytyc common stock when including cost synergies from the merger as estimated by Cytyc management, plus $16.50 in cash per share of Cytyc common stock, was $40.00 to $51.67.

Morgan Stanley also noted that the range of implied value per share to be received by Cytyc stockholders in exchange for their Cytyc common stock when including revenue and cost synergies from the merger as estimated by Cytyc management, plus $16.50 in cash per share of Cytyc common stock, was $41.80 to $54.12.

In connection with the review of the merger by Cytyc’s board of directors, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Cytyc. In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Many of these assumptions are beyond the control of Cytyc. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness of the merger consideration pursuant to the merger agreement from a financial point of view to holders of shares of Cytyc common stock and in connection with the delivery of its opinion to Cytyc’s board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of common stock of Cytyc might actually trade.

The merger consideration was determined through arm’s-length negotiations between Cytyc and Hologic and was approved by Cytyc ‘s board of directors. Morgan Stanley provided advice to Cytyc during these negotiations. Morgan Stanley did not, however, recommend any specific merger consideration to Cytyc or that any specific merger consideration constituted the only appropriate merger consideration for the merger.

Morgan Stanley’s opinion and its presentation to Cytyc’s board of directors was one of many factors taken into consideration by Cytyc’s board of directors in deciding to approve, adopt and authorize the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of Cytyc’s board of directors with respect to the merger consideration or of whether Cytyc’s board of directors would have been willing to agree to a different merger consideration.

 

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Morgan Stanley is an internationally recognized investment banking and advisory firm. Morgan Stanley, as part of its investment banking and financial advisory business, is continuously engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate, estate and other purposes. In the ordinary course of its trading, brokerage, investment management and financing activities, Morgan Stanley or its affiliates may actively trade the equity securities of Cytyc for its own accounts or for the accounts of its customers and, accordingly, may at any time hold long or short positions in such securities. In the past, Morgan Stanley and its affiliates have provided financial advisory services for Cytyc and have received fees for the rendering of these services.

Under the terms of its engagement letter, Morgan Stanley provided Cytyc financial advisory services and a financial opinion in connection with the merger, and Cytyc agreed to pay Morgan Stanley a customary fee, which is contingent upon completion of the merger. Cytyc has also agreed to reimburse Morgan Stanley for its expenses incurred in performing its services. In addition, Cytyc has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of Morgan Stanley’s engagement.

Opinion of JPMorgan. Pursuant to an engagement letter dated May 16, 2007, Cytyc retained JPMorgan to act as its financial advisor for the purpose of rendering to the Cytyc board of directors an opinion as to the fairness, from a financial point of view, of the merger consideration to be received by the holders of Cytyc common stock in the merger. At the meeting of the Cytyc board of directors on May 20, 2007, JPMorgan rendered its oral opinion, subsequently confirmed in writing, to the Cytyc board of directors to the effect that, as of that date and based upon and subject to the matters set forth in JPMorgan’s opinion, the merger consideration to be received by holders of Cytyc common stock in the merger was fair, from a financial point of view, to those holders.

The full text of the written opinion of JPMorgan, dated May 20, 2007, which sets forth the assumptions made, matters considered and limits on the review undertaken by JPMorgan in rendering its opinion, is attached as Annex F to this joint proxy statement/prospectus. Cytyc encourages its stockholders to read the opinion carefully in its entirety. JPMorgan’s written opinion was addressed to the Cytyc board of directors, was directed only to the fairness, from a financial point of view, of the consideration to be received by holders of Cytyc common stock in the merger, and does not constitute a recommendation to any Cytyc stockholder as to how such stockholder should vote with respect to the merger or any other matter. The summary of the opinion of JPMorgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion, JPMorgan, among other things:

 

   

reviewed the merger agreement;

 

   

reviewed certain publicly available business and financial information concerning Cytyc and Hologic and the industries in which they operate;

 

   

compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies JPMorgan deemed relevant and the consideration received for such companies;

 

   

compared the financial and operating performance of Cytyc and Hologic with publicly available information concerning certain other companies JPMorgan deemed relevant and reviewed the current and historical market prices of Cytyc common stock and Hologic common stock and certain publicly traded securities of such other companies;

 

   

reviewed certain internal financial analyses and forecasts prepared by Hologic management relating to the business of Hologic;

 

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reviewed certain internal financial analyses and forecasts prepared by Cytyc management relating to the businesses of Cytyc and Hologic, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the merger, which are referred to below as the synergies; and

 

   

performed other financial studies and considered other information as JPMorgan deemed appropriate for the purposes of its opinion.

JPMorgan also held discussions with certain members of Cytyc management and Hologic management with respect to certain aspects of the merger, the past and current business operations of Cytyc and Hologic, the financial condition and future prospects and operations of Cytyc and Hologic, the effects of the merger on the financial condition and future prospects of Cytyc and Hologic, and certain other matters that JPMorgan believed necessary or appropriate to its inquiry.

In giving its opinion, JPMorgan relied upon and assumed, without assuming responsibility or liability for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to or discussed with JPMorgan by Cytyc and Hologic or otherwise reviewed by or for JPMorgan. JPMorgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did JPMorgan evaluate the solvency of Cytyc or Hologic under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to JPMorgan, including the synergies, JPMorgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by Cytyc management as to the expected future results of operations and financial condition of Cytyc and Hologic to which those analyses or forecasts relate. JPMorgan expressed no view as to those analyses or forecasts, including the synergies, or the assumptions on which they were based. JPMorgan also assumed that the merger will qualify as a tax-free reorganization for United States federal income tax purposes, and that the other transactions contemplated by the merger agreement will be completed as described in the merger agreement. JPMorgan also assumed that the representations and warranties made by Cytyc and Hologic in the merger agreement and the related agreements will be true and correct in all ways material to JPMorgan’s analysis. JPMorgan relied as to all legal, regulatory and tax matters relevant to the rendering of its opinion upon the advice of advisors to Cytyc. JPMorgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the completion of the merger will be obtained without any adverse effect on Cytyc, Hologic or on the contemplated benefits of the merger.

JPMorgan’s opinion was based on economic, market and other conditions as in effect on, and the information made available to JPMorgan as of, the date of its opinion. Subsequent developments may affect the opinion, and JPMorgan does not have any obligation to update, revise or reaffirm its opinion. JPMorgan’s opinion was limited to the fairness, from a financial point of view, of the consideration to be received by holders of Cytyc common stock in the merger, and JPMorgan expressed no opinion as to the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of Cytyc or as to the underlying decision by Cytyc to engage in the merger. JPMorgan expressed no opinion as to the price at which Cytyc common stock or Hologic common stock will trade at any future time.

JPMorgan was not requested to and did not provide advice concerning the structure, the specific amount of the merger consideration, or any other aspects of the merger, or to provide services other than the delivery of its opinion. JPMorgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of Cytyc or any other alternative transaction, and did not participate in negotiations with respect to the terms of the merger and related transactions.

In accordance with customary investment banking practice, JPMorgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by JPMorgan in connection with providing its opinion. The financial analyses summarized below include

 

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information presented in tabular format. In order to fully understand JPMorgan’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of JPMorgan’s financial analyses.

Transaction Overview

Based upon the closing price per share of Hologic common stock of $57.61 on May 18, 2007, which was the last trading day prior to the public announcement of the merger, the exchange ratio of 0.52 of a share of Hologic common stock per share of Cytyc common stock, and the cash consideration of $16.50 per share of Cytyc common stock, JPMorgan noted that the implied value of the merger consideration pursuant to the merger as of May 18, 2007 was $46.46 per share of Cytyc common stock. JPMorgan also noted that the implied merger consideration of $46.46 per share of Cytyc common stock represented:

 

   

a premium of 32.5% over the closing price per share of Cytyc common stock on May 18, 2007 of $35.05;

 

   

a premium of 25.2% over the highest closing price per share of Cytyc common stock for the 52-weeks ending May 18, 2007;

 

   

a premium of 32.2% over the average closing price per share of Cytyc common stock for the 1-month ending May 18, 2007;

 

   

a premium of 38.2% over the average closing price per share of Cytyc common stock for the 3-months ending May 18, 2007;

 

   

a premium of 50.1% over the average closing price per share of Cytyc common stock for the 6-months ending May 18, 2007; and

 

   

a premium of 67.0% over the average closing price per share of Cytyc common stock for the 1-year ending May 18, 2007.

Cytyc Analysis

Historical Share Price Analysis. JPMorgan reviewed the price performance of Cytyc common stock during various periods ending on May 18, 2007, on a stand-alone basis and also in relation to Hologic common stock, the S&P 500, and a composite index consisting of the following publicly traded companies:

 

   

American Medical Systems, Inc.;

 

   

ArthroCare Corporation;

 

   

Digene Corporation;

 

   

Gen-Probe Incorporated;

 

   

Immucor, Inc.; and

 

   

Ventana Medical Systems, Inc.

JPMorgan noted that the low and high trading prices per share of Cytyc common stock during the 52-week period ending on May 18, 2007 were approximately $22.79 and $37.10, compared to the closing price per share of Cytyc common stock of $35.05 on May 18, 2007 and the implied merger consideration of $46.46 per share of Cytyc common stock.

Analyst Price Targets. JPMorgan reviewed price targets for Cytyc common stock published by Wall Street equity research analysts from April 26, 2007 through May 15, 2007. These price targets for Cytyc common stock

 

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ranged from $32.00 to $42.00 per share, compared to the closing price per share of Cytyc common stock of $35.05 on May 18, 2007 and the implied merger consideration of $46.46 per share of Cytyc common stock.

Selected Companies Analysis. Using publicly available information and information provided by Cytyc management, JPMorgan compared selected financial data of Cytyc with similar data for the group of companies listed above under “- Historical Share Price Analysis.” In its analysis, JPMorgan derived and compared multiples for Cytyc and the selected companies, calculated as follows:

 

   

the price per share divided by estimated earnings per share, or EPS, for calendar year 2007, which is referred to below as “2007E P/E”; and

 

   

the price per share divided by the product obtained by multiplying estimated EPS for calendar year 2007 by the estimated long-term earnings per share growth rate, which is referred to below as “2007E PEG.”

This analysis indicated the following:

Selected Companies Analysis

 

Benchmark

   High    Low

2007E P/E

   39.2x    28.0x

2007E PEG

   1.68x    1.10x

Using a reference range of 25.0x to 33.0x Cytyc’s 2007E EPS and 1.20x to 1.70x Cytyc’s 2007E PEG, JPMorgan determined a range of implied equity values for Cytyc. This analysis indicated a range of implied values per share of Cytyc common stock of approximately $33.00 to $43.50 using Cytyc’s 2007E EPS and $27.00 to $38.25 using Cytyc’s 2007E PEG, compared in each case to the closing price per share of Cytyc common stock of $35.05 on May 18, 2007 and the implied merger consideration of $46.46 per share of Cytyc common stock.

It should be noted that no company utilized in the analysis above is identical to Cytyc.

Selected Transactions Analysis. Using publicly available information, JPMorgan reviewed the following transactions involving companies in the focused diagnostics/women’s health industry. The transactions considered and the month and year each transaction was announced were as follows:

 

Acquiror

 

Target

 

Month and Year Announced

Inverness Medical Innovations, Inc.   Biosite Incorporated   May 2007
Cytyc Corporation   Adeza Biomedical Corporation   February 2007
General Electric Company   Abbott Diagnostics   January 2007
Danaher Corporation   Vision Systems Limited   October 2006
Becton Dickinson and Company   TriPath Imaging, Inc.   August 2006
Siemens AG   Bayer Diagnostics   June 2006
Siemens AG   Diagnostic Products Corporation   April 2006
Hologic   R2 Technology, Inc.   April 2006
Hologic   Suros Surgical Systems, Inc.   April 2006
Cytyc   Novacept Inc.   March 2004

Using publicly available estimates, JPMorgan reviewed the transaction value as a multiple of the target company’s latest twelve months, or LTM, earnings before interest, taxes, depreciation and amortization, or EBITDA, immediately preceding announcement of the transaction, which is referred to below as “Firm Value/LTM EBITDA.”

 

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This analysis indicated the following:

Selected Transactions Analysis

 

Benchmark

   High    Low    Mean    Median

Firm Value/LTM EBI