Hologic, Inc.  Notes to Consolidated Financial Statements (continued) (In thousands, except per share data) effective date (a) based on the requirements of SFAS 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123(R) that remain unvested on the effective date.
As a result, the Company is recognizing compensation for the fair value of the unvested portion of option grants issued prior to the adoption of SFAS 123(R), whose fair value was calculated utilizing a Black-Scholes Option Pricing Model.
In addition, SFAS 123(R) requires companies to utilize an estimated forfeiture rate when calculating the expense for the period, whereas, SFAS 123 permitted companies to record forfeitures based on actual forfeitures, which was the Company’s historical policy under SFAS 123.
As a result the Company has applied an estimated forfeiture rate in determining the expense recorded related to employee stock options in the Company’s Consolidated Statements of Operations.
Compensation expense related to stock options reduced both basic and diluted earning per share by $0.04, $0.03 and $0.02 for fiscal 2008, 2007 and 2006, respectively.
These results reflect stock compensation expense related to stock options of $13,968, $4,725 and $3,560 and related tax benefit of $5,154, $1,715 and $1,727 for fiscal 2008, 2007 and 2006, respectively.
No stock-based compensation expense was capitalized as part of inventory during fiscal years 2008, 2007 or 2006.
In accordance with the modified-prospective transition method of SFAS 123(R), results for prior periods have not been restated.
As of September 27, 2008 there was approximately $30,438 of unrecognized compensation expense related to non-vested market-based stock options that is expected to be recognized over a weighted average grant period of 3.53 years.
Included in stock-based compensation expense for fiscal 2008 was $2,662 as a result of the acceleration of vesting for certain outstanding Hologic stock options upon the close of the merger with Cytyc.
The original terms of these employee stock options provided for acceleration of vesting upon a change of control.
Stock-based compensation expense includes a total of $3,512 related to option modifications during fiscal 2008.
During this period, the Company recorded $768 related to a modification of certain options to extend the period of time to exercise upon termination from 90 days to August 31, 2009 upon termination of the Company’s Chairman of the Board of Directors (See Note 12).
The Company also recorded $2,264 of stock-based compensation as a result of a modification of certain stock options in connection with the Cytyc Merger Agreement in May 2007.
The modification provided for acceleration of vesting of the unvested options upon a termination as a result of a change of control, as well as an extension of the period to exercise vested options from 90 days to December 31, 2009, which occurred upon the close of the merger with Cytyc.
Additionally, stock-based compensation expense included $480 related to certain former Third Wave executives who were terminated.
Effective with the adoption of SFAS 123(R), the Company elected to use a binomial lattice model to determine the weighted average fair value of options.
The Company considers a number of factors to determine the fair value of options including the advice of an outside valuation advisor and the advisor’s model.
The weighted average fair value of options granted during the fiscal year ended 2008, 2007 and 2006, under the binomial valuation method, was $10.61 per share, $13.19 per share and $9.77 per share, respectively.
The weighted-average assumptions utilized to determine such values are indicated in the following table:
## Table 0 ##
Hologic, Inc.  Notes to Consolidated Financial Statements (continued) (In thousands, except per share data) Acquisition of R2 Technology, Inc.  On July 13, 2006, the Company completed the acquisition of R2 Technology, Inc.  (“R2”) pursuant to an Agreement and Plan of Merger dated April 24, 2006.
The results of operations for R2 have been included in the Company’s consolidated financial statements from the date of acquisition as part of its Mammography/Breast Care business segment.
R2, previously located in Santa Clara, California, develops and sells computer-aided detection technology and products (“CAD”), an innovative technology that assists radiologists in the early detection of breast cancer.
The aggregate purchase price for R2 of approximately $220,600 consisted of approximately 8,800 shares of Hologic Common Stock valued at $205,500, cash paid of $6,900, debt assumed of $5,700 and approximately $2,500 for acquisition related fees and expenses.
The Company determined the fair value of the shares issued in connection with the acquisition in accordance with EITF Issue No.99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination.
The components and allocation of the purchase price, consists of the following approximate amounts:
## Table 1 ##
The Company finalized and completed a plan to restructure certain of R2’s historical activities.
As of the acquisition date the Company recorded a liability of approximately $798 in accordance with EITF Issue No.95-3, Recognition of Liabilities in Connection with a Purchase Business Combination, related to the termination of certain employees and loss related to the abandonment of certain lease space under this plan.
All amounts under this plan have been paid as of September 29, 2007.
The Company reduced goodwill related to the R2 acquisition in the amount of approximately $2,300 and $400 during the years ended September 27, 2008 and September 29, 2007, respectively.
The reduction in 2007 was primarily related to a change in the preliminary valuation of certain assets and liabilities acquired based on information received during the year.
The decrease in goodwill in 2008 was related to the reduction of an income tax liability.
The final purchase price allocations were completed and the adjustments did not have a material impact on the Company’s financial position or results of operation.
As part of the purchase price allocation, all intangible assets that were a part of the acquisition were identified and valued.
It was determined that only customer relationship, trade name, developed technology and know how and in-process research and development had separately identifiable values.
Customer relationship represents R2’s strong active customer base, dominant market position and strong partnership with several large companies.
Trade name represents the R2 product names that the Company intends to continue to use.
Order backlog consists of customer orders for which revenue has not yet been recognized.
Developed technology and know how represents currently marketable purchased products that the Company continues to resell as well as utilize to enhance and incorporate into the Company’s existing products.
The estimated $10,200 of purchase price allocated to in-process research and development projects primarily related to R2’s Digital CAD products.
The projects added direct digital algorithm capabilities as well as
approximately $219.3 million, that we acquired in connection with our business combination with Cytyc, and an increase in revenues from our Breast Health products of approximately $172.2 million.
Breast Health product sales increased 31% in fiscal 2008 compared to fiscal 2007, primarily due to a $97.0 million increase in worldwide digital mammography system sales, the addition of $33.9 million of product sales of the MammoSite Radiation Therapy System, a $23.6 million increase in breast biopsy device sales from Suros and an increase of $21.5 million in product sales of the MammoPad breast cushion.
Partially offsetting these increases was a decrease of $6.4 million in digital array sales to an OEM as we phase out of selling these arrays to third parties.
The MammoSite system was acquired in connection with our business combination with Cytyc in October 2007 and the MammoPad breast cushion was acquired in connection with our BioLucent acquisition in September 2007.
The increase in our digital mammography product sales was primarily attributable to an increase in the number of Selenia systems and related components sold, including our R2 CAD software.
In fiscal 2008 we sold 1,678 digital mammography systems compared to 1,189 systems in fiscal 2007.
This revenue was partially offset by a decrease in average selling prices primarily attributable to increased competition, higher dealer sales, changes in product configuration and increased multi-system sales.
We attribute the increase in digital mammography system sales primarily to the growing acceptance of our Selenia mammography system and of digital mammography in general.
We expect the growth in the sales of these systems to slow as the market for digital mammography matures.
Diagnostics product sales were $474.6 million in fiscal 2008, due to the inclusion of Cytyc results for 49 of the 52 weeks in the current year as well as 9 weeks of Third Wave revenues of approximately $5.9 million.
Cytyc Diagnostic sales include our ThinPrep and FullTerm products.
GYN Surgical product sales were $219.3 million in fiscal 2008, due to the inclusion of Cytyc results for 49 of the 52 weeks in the current year.
These sales include our NovaSure system.
Skeletal Health product sales increased 11% in fiscal 2008 compared to fiscal 2007, primarily due to a $10.8 million increase in mini C-arm sales worldwide, partially offset by a $2.0 million decrease in extremity MRI sales and a $1.2 million decrease in bone densitometry product sales.
The increase in mini C-arm sales was primarily due to an increase in the number of units sold and, to a lesser extent, an increase in the average selling prices related to the commercialization of a new and enhanced product version.
The decrease in extremity MRI sales was due to a decrease in the number of systems sold.
The decrease in bone densitometry sales was primarily due to a decrease in the number of used bone densitometry systems and upgrades sold and a decrease in the average selling prices of our bone densitometry systems in the United States, partially offset by an increase in the number of bone densitometry systems sold internationally.
We believe the decrease in our domestic osteoporosis assessment average selling prices reflected a decline in market conditions due in part to a reduction in reimbursement for osteoporosis assessment exams.
In fiscal 2008, approximately 80% of product sales were generated in the United States, 12% in Europe, 4% in Asia, and 4% in other international markets.
In fiscal 2007, approximately 75% of product sales were generated in the United States, 15% in Europe, 5% in Asia, and 5% in other international markets.
The increase in the percentage of product sales generated in the United States in fiscal 2008 is primarily due to the additional product sales from Cytyc, which had a higher percentage of its product sales from the United States than our historical businesses.
Service and Other Revenues.
## Table 2 ##
Table of Contents Cost of Service and Other Revenues.
## Table 3 ##
Service and other revenues gross margin was 45% in fiscal 2012 compared to 46% in fiscal 2011.
Gross margin decreased due to additional expenses incurred related to international expansion, which has resulted in the hiring of additional service personnel, increasing compensation and travel costs worldwide.
In addition, service costs have increased in our Diagnostics segment due to an increase in our installed base of ThinPrep processors and imagers.
Operating Expenses.
## Table 4 ##
Research and Development Expenses.
Research and development expenses increased 12% in fiscal 2012 compared to fiscal 2011 primarily due to the inclusion of Gen-Probe, which accounted for $17.1 million of additional expenses.
Partially offsetting this increase was a decrease in compensation and benefits due to lower bonus expenses, and a reduction in clinical trials and regulatory costs, which was primarily a result of the status and timing of projects.
Research and development primarily reflects spending on new product development programs, regulatory compliance and clinical research and trials.
At any point in time, we have a number of different research projects and clinical trials being conducted and the timing of these projects and related costs can vary period to period.
Selling and Marketing Expenses.
Selling and marketing expenses increased 12% in fiscal 2012 compared to fiscal 2011.
These increases were primarily due to additional expenses from the inclusion of Gen-Probe, which accounted for $8.4 million of additional expense, and the inclusion of TCT for a full year, an increase in the number of sales personnel in the GYN Surgical business segment, an increase in compensation and benefits and higher commissions, continuing product launch activities related to our 3D Dimensions product, and higher travel expenses.
These expenses were also higher due to the extra week in fiscal 2012 compared to fiscal 2011.
The increase in fiscal 2012 was partially offset by lower expenditures for our direct-to-consumer advertising campaign for NovaSure.
General and Administrative Expenses.
General and administrative expenses increased 39% in fiscal 2012 compared to fiscal 2011 primarily due to higher acquisition related transaction costs associated with the Gen-Probe acquisition of $34.3 million, additional expenses, including retention costs, from the inclusion of Gen-Probe of $12.8 million, integration and consulting costs related to the Gen-Probe acquisition, an increase in bad debt expense internationally, charges for an ongoing state sales tax audit, an increase in the Nonqualified Deferred Compensation Plan, or DCP, liability, which is driven by the underlying market changes of hypothetical investments, and higher invoice collection fees from higher credit card payments.
These expenses were also higher due to

<table><tr><td rowspan="2"></td><td colspan="3"> Years ended</td></tr><tr><td> September 27, 2008</td><td>September 29, 2007</td><td> September 30, 2006</td></tr><tr><td>Risk-free interest rates</td><td>2.7% to 4.0%</td><td>5.0%</td><td>4.6%</td></tr><tr><td>Dividend yield</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Expected life (in years)</td><td>3.8 to 4.6</td><td>5.0</td><td>4.7</td></tr><tr><td>Expected volatility</td><td>36% to 38%</td><td>55.0%</td><td>55.0%</td></tr><tr><td>Forfeiture rate</td><td>6.8% to 9.0%</td><td>9.4%</td><td>9.4% to 10.6%</td></tr></table>
<table><tr><td>Net tangible assets acquired as of July 13, 2006</td><td>$1,200</td></tr><tr><td>In-process research and development</td><td>10,200</td></tr><tr><td>Developed technology and know-how</td><td>39,500</td></tr><tr><td>Customer relationship</td><td>15,700</td></tr><tr><td>Trade name</td><td>3,300</td></tr><tr><td>Order backlog</td><td>800</td></tr><tr><td>Deferred income taxes</td><td>6,700</td></tr><tr><td>Goodwill</td><td>143,200</td></tr><tr><td>Final purchase price</td><td>$220,600</td></tr></table>
<table><tr><td></td><td colspan="6"> Years Ended</td></tr><tr><td></td><td colspan="2">September 27, 2008</td><td colspan="2">September 29, 2007</td><td colspan="2"> Change</td></tr><tr><td></td><td> Amount</td><td>% of Total Revenue</td><td> Amount</td><td>% of Total Revenue</td><td> Amount</td><td> %</td></tr><tr><td><i>Service and Other Revenues</i></td><td>$172,052</td><td>10%</td><td>$109,514</td><td>15%</td><td>$62,538</td><td>57%</td></tr></table>
<table><tr><td></td><td colspan="6"> Years Ended</td></tr><tr><td></td><td colspan="2">September 29, 2012</td><td colspan="2">September 24, 2011</td><td colspan="2"> Change</td></tr><tr><td></td><td> Amount</td><td>% of Service andOther Revenues</td><td> Amount</td><td>% of Service andOther Revenues</td><td> Amount</td><td> %</td></tr><tr><td><i>Cost of Service and Other Revenues</i></td><td>$189,512</td><td>55%</td><td>$167,523</td><td>54%</td><td>$21,989</td><td>13%</td></tr></table>
<table><tr><td></td><td colspan="6">Years Ended</td></tr><tr><td></td><td colspan="2">September 29, 2012</td><td colspan="2">September 24, 2011</td><td colspan="2">Change</td></tr><tr><td></td><td>Amount</td><td>% of Total Revenue</td><td>Amount</td><td>% of Total Revenue</td><td>Amount</td><td>%</td></tr><tr><td><i>Operating Expenses</i></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Research and development</td><td>$130,962</td><td>7%</td><td>$116,696</td><td>7%</td><td>$14,266</td><td>12%</td></tr><tr><td>Selling and marketing</td><td>322,314</td><td>16%</td><td>286,730</td><td>16%</td><td>35,584</td><td>12%</td></tr><tr><td>General and administrative</td><td>220,042</td><td>11%</td><td>158,793</td><td>9%</td><td>61,249</td><td>39%</td></tr><tr><td>Amortization of intangible assets</td><td>72,036</td><td>4%</td><td>58,334</td><td>3%</td><td>13,702</td><td>23%</td></tr><tr><td>Contingent consideration—compensation expense</td><td>81,031</td><td>4%</td><td>20,002</td><td>1%</td><td>61,029</td><td>305%</td></tr><tr><td>Contingent consideration—fair value adjustments</td><td>38,466</td><td>2%</td><td>-8,016</td><td>0%</td><td>46,482</td><td>-580%</td></tr><tr><td>Impairment of goodwill</td><td>5,826</td><td>0%</td><td>—</td><td>—</td><td>5,826</td><td>100%</td></tr><tr><td>Gain on sale of intellectual property, net</td><td>-12,424</td><td>-1%</td><td>-84,502</td><td>-5%</td><td>72,078</td><td>-85%</td></tr><tr><td>Litigation settlement charges, net</td><td>452</td><td>0%</td><td>770</td><td>0%</td><td>-318</td><td>-41%</td></tr><tr><td>Acquired in-process research and development</td><td>4,500</td><td>0%</td><td>—</td><td>—</td><td>4,500</td><td>100%</td></tr><tr><td>Restructuring and divestiture charges, net</td><td>17,515</td><td>1%</td><td>-71</td><td>0%</td><td>17,586</td><td>-24,769%</td></tr><tr><td></td><td>$880,720</td><td>44%</td><td>$548,736</td><td>31%</td><td>$331,984</td><td>61%</td></tr></table>

Question: what potion of the r2 acquisition is paid in cash?
Answer: 0.03128