<PAGE>
                                                                    Exhibit 10.3


                              R2 TECHNOLOGY, INC.

                      FORM OF EMPLOYEE STOCK PURCHASE PLAN

     R2 Technology, Inc., a Delaware corporation (the "Company"), hereby adopts
the R2 Technology, Inc. Employee Stock Purchase Plan (the "Plan"), effective as
of the Effective Date (as defined herein).

     1. Purpose. The purposes of the Plan are as follows:
        -------
     (a) To assist employees of the Company and its Designated Subsidiaries (as
defined below) in acquiring a stock ownership interest in the Company pursuant
to a plan which is intended to qualify as an "employee stock purchase plan"
within the meeting of Section 423(b) of the Internal Revenue Code of 1986, as
amended.

     (b) To help employees provide for their future security and to encourage
them to remain in the employment of the Company and its Designated Subsidiaries.

     2. Definitions.
        -----------

     (a) "Administrator" shall mean administrator of the Plan, as determined
          -------------
pursuant to Section 14 hereof.


     (b) "Board" shall mean the Board of Directors of the Company.
          -----

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
          ----

     (d) "Committee" shall mean the committee appointed to administer the Plan
          ---------
pursuant to Section 14 hereof.

     (e) "Common Stock" shall mean the common stock of the Company.
          ------------

     (f) "Company" shall mean R2 Technology, Inc., a Delaware corporation, and
          -------
any successor by merger, consolidation or otherwise.

     (g) "Compensation" shall mean all base straight time gross earnings and
          ------------
commissions, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses, expense reimbursements, fringe
benefits and other compensation.

     (h) "Designated Subsidiary" shall mean any Subsidiary which has been
          ---------------------
designated by the Administrator from time to time in its sole discretion as
eligible to participate in the Plan. The Administrator may designate, or
terminate the designation of, a subsidiary as a Designated Subsidiary without
the approval of the stockholders of the Company.

     (i) "Effective Date" shall mean the date on which the Company's
          --------------
Registration Statement on Form S-8 filed with respect to the Plan becomes
effective.


<PAGE>

     (j) "Eligible Employee" shall mean an Employee of the Company or a
          -----------------
Designated Subsidiary: (i) who does not, immediately after the Option is
granted, own stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company, a Parent or a
Subsidiary (as determined under Section 423(b)(3) of the Code); (ii) whose
customary employment is for more than twenty (20) hours per week; and (iii)
whose customary employment is for more than five (5) months in any calendar
year. For purposes of clause (i), the rules of Section 424(d) of the Code with
regard to the attribution of stock ownership shall apply in determining the
stock ownership of an individual, and stock which an employee may purchase under
outstanding options shall be treated as stock owned by the employee. For
purposes of the Plan, the employment relationship shall be treated as continuing
intact while the individual is on sick leave or other leave of absence approved
by the Company or Designated Subsidiary and meeting the requirements of Treasury
Regulation Section 1.421-7(h)(2). Where the period of leave exceeds ninety (90)
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the ninety-first (91st) day of such leave.

     (k) "Employee" shall mean any person who renders services to the Company or
          --------
a Subsidiary in the status of an employee within the meaning of Code Section
3401(c). "Employee" shall not include any director of the Company or a
Subsidiary who does not render services to the Company or a Subsidiary in the
status of an employee within the meaning of Code Section 3401(c).

     (l) "Enrollment Date" shall mean the first Trading Day of each Offering
          ---------------
Period.

     (m) "Exercise Date" shall mean the last Trading Day of each Purchase
          -------------
Period.

     (n) "Fair Market Value" shall mean, as of any date, the value of Common
          -----------------
Stock determined as follows:

              (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the purchase, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;

              (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date prior to the purchase as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;

              (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator; or

              (iv) For purposes of the first Offering Period under the Plan, the
Fair Market Value shall be the initial price to the public as set forth in the
final prospectus included

                                       2

<PAGE>

within the registration statement in Form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Company's Common
Stock (the "Registration Statement").

              (o) "Offering Period" shall mean (i) the period commencing on the
                   ---------------
Effective Date and ending on the last Trading Day on or before the January 1 or
July 1 following the Effective Date that is at least eighteen (18) months but
not more than twenty-four (24) months following the Effective Date, and (ii)
subject to Section 24, each twenty-four (24) month period commencing on any
January 1 or July 1 thereafter following the termination of the preceding
Offering Period and terminating on the last Trading Day in the periods ending
twenty-four (24) months later. The duration and timing of Offering Periods may
be changed pursuant to Section 4 of this Plan.

              (p) "Parent" means any corporation, other than the Company, in an
                   ------
unbroken chain of corporations ending with the Company if, at the time of the
determination, each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

              (q) "Plan" shall mean this R2 Technology, Inc. Employee Stock
                   ----
Purchase Plan.

              (r) "Purchase Period" shall mean the approximately six (6) month
                   ---------------
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
Notwithstanding the foregoing, the first Purchase Period with respect to the
initial Offering Period under the Plan shall end on the last Trading Day on or
before the next occurring January 1 or July 1 following the Effective Date and
such period may be less than six-months in duration.

              (s) "Purchase Price" shall mean 85% of the Fair Market Value of a
                   --------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided, however, that the Purchase Price may be adjusted by the
          --------  -------
Administrator pursuant to Section 20.

              (t) "Subsidiary" shall mean any corporation, other than the
                   ----------
Company, in an unbroken chain of corporations beginning with the Company if, at
the time of the determination, each of the corporations other than the last
corporation in an unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

              (u) "Trading Day" shall mean a day on which national stock
                   -----------
exchanges and the Nasdaq System are open for trading.



     3. Eligibility.
        -----------

              (a) Any Eligible Employee who shall be employed by the Company or
a Designated Subsidiary on a given Enrollment Date for an Offering Period shall
be eligible to participate in the Plan during such Offering Period, subject to
the requirements of Section 5 and the limitations imposed by Section 423(b) of
the Code.


                                        3

<PAGE>

              (b) Each person who, during the course of an Offering Period,
first becomes an Eligible Employee subsequent to the Enrollment Date will be
eligible to become a participant in the Plan on the first day of the first
Purchase Period following the day on which such person becomes an Eligible
Employee, subject to the requirements of Section 5 and the limitations imposed
by Section 423(b) of the Code.

              (c) No Eligible Employee shall be granted an option under the Plan
which permits his rights to purchase stock under the Plan, and to purchase stock
under all other employee stock purchase plans of the Company, any Parent or any
Subsidiary subject to the Section 423, to accrue at a rate which exceeds $25,000
of fair market value of such stock (determined at the time the option is
granted) for each calendar year in which the option is outstanding at any time.
For purpose of the limitation imposed by this subsection, the right to purchase
stock under an option accrues when the option (or any portion thereof) first
becomes exercisable during the calendar year, the right to purchase stock under
an option accrues at the rate provided in the option, but in no case may such
rate exceed $25,000 of fair market value of such stock (determined at the time
such option is granted) for any one calendar year, and a right to purchase stock
which has accrued under an option may not be carried over to any option. This
limitation shall be applied in accordance with Section 423(b)(8) of the Code and
the Treasury Regulations thereunder.

     4. Offering Periods. Subject to Section 24, the Plan shall be implemented
        ----------------
by consecutive, overlapping Offering Periods which shall continue until the Plan
expires or is terminated in accordance with Section 20 hereof. The Administrator
shall have the power to change the duration of Offering Periods (including the
commencement dates thereof) with respect to future offerings without shareholder
approval if such change is announced at least five (5) days prior to the
scheduled beginning of the first Offering Period to be affected thereafter.

     5. Participation.
        -------------

              (a) Each Eligible Employee who is employed by the Company or a
Designated Subsidiary on the calendar day immediately preceding the Effective
Date shall automatically become a participant in the Plan with respect to the
first Offering Period. Each such participant shall be granted an option to
purchase shares of Common Stock and shall be enrolled in such first Offering
Period to the extent of twenty percent (20%) of his or her Compensation for the
pay days during the first Offering Period (or, if less, the maximum amount of
contributions permitted to be made by such participant for such Offering Period
by payroll deduction under the terms of this Plan). Participants wishing to
purchase shares of Common Stock during the first Offering Period shall do so by
making a lump sum cash payment to the Company not later than ten (10) calendar
days before each Exercise Date of such Offering Period, and each such payment
may be made in an amount not exceeding twenty percent (20%) of such
participant's Compensation for the pay days occurring during such Offering
Period and occurring prior to such lump sum payment; provided, however, that
                                                     --------  -------
such participant shall not be required to make such lump sum cash payments, or
exercise all or any portion of such option to purchase shares of Common Stock by
making such lump sum payments. Following the Effective Date, each such
participant may, during the period designated from time to time by the
Administrator for such purpose, elect to make such contributions (or a lesser
amount of contributions) for the first Offering Period by payroll deductions in
accordance with Section 6, in lieu of making contributions in such lump sum cash
payments under this subsection (a), or may elect

                                       4


<PAGE>

to make no contributions for such Offering Period; provided, however, that, to
                                                   --------  -------
make contributions by payroll deductions, such participant must complete the
form of subscription agreement provided by the Company for the first Offering
Period under this Plan. If (i) during such Offering Period, such a participant
elects to make contributions by payroll deduction, or elects to make no
contributions for such Offering Period, or (ii) on or prior to the tenth (10th)
calendar day before the last Exercise Date of such Offering Period, such a
participant fails to make any lump sum cash payment, such participant shall be
deemed to have elected not to make contributions by lump sum payment with
respect to such first Offering Period. Except as described in subsection (e)
below, a participant may not make contributions by lump sum payment for any
Offering Period other than the first Offering Period.

                  (b) Following the first Offering Period, an Eligible Employee
may become a participant in the Plan by completing a subscription agreement
authorizing payroll deductions in the form of Exhibit A to this Plan and filing
it with the Company's payroll office fifteen (15) days (or such shorter or
longer period as may be determined by the Administrator, in its sole discretion)
prior to the applicable Enrollment Date.

                  (c) Each person who, during the course of an Offering Period,
first becomes an Eligible Employee subsequent to the Enrollment Date will be
eligible to become a participant in the Plan on the first day of the first
Purchase Period following the day on which such person becomes an Eligible
Employee. Such person may become a participant in the Plan by completing a
subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it with the Company's payroll office fifteen (15) days
(or such shorter or larger period as may be determined by the Administrator, in
its sole discretion) prior to the first day of any Purchase Period during the
Offering Period in which such person becomes an Eligible Employee. The rights
granted to such participant shall have the same characteristics as any rights
originally granted under during that Offering Period except that the first day
of the Purchase Period in which such person initially participates in the Plan
shall be the "Enrollment Date" for all purposes for such person, including
determination of the Purchase Price.

                  (d) Except as provided in subsection (a), payroll deductions
for a participant shall commence on the first payroll following the Enrollment
Date and shall end on the last payroll in the Offering Period to which such
authorization is applicable, unless sooner terminated by the participant as
provided in Section 10 hereof.

                  (e) During a leave of absence approved by the Company or a
Subsidiary and meeting the requirements of Treasury Regulation Section
1.421-7(h)(2), a participant may continue to participate in the Plan by making
cash payments to the Company on each pay day equal to the amount of the
participant's payroll deductions under the Plan for the pay day immediately
preceding the first day of such participant's leave of absence. If a leave of
absence is unapproved or fails to meet the requirements of Treasury Regulation
Section 1.421-7(h)(2), the participant will cease automatically to participate
in the Plan. In such event, the company will automatically cease to deduct the
participant's payroll under the Plan. The Company will pay to the participant
his or her total payroll deductions for the quarterly purchase period, in cash
in one lump sum (without interest), as soon as practicable after the participant
ceases to participate in the Plan.

                                       5


<PAGE>

                  (f) A participant's completion of a subscription agreement
will enroll such participant in the Plan for each successive Purchase Period and
each subsequent Offering Period on the terms contained therein until the
participant either submits a new subscription agreement, withdraws from
participation under the Plan as provided in Section 10 hereof or otherwise
becomes ineligible to participate in the Plan.

     6. Payroll Deductions.
        ------------------

                  (a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount from one percent (1%) to twenty percent
(20%) of the Compensation which he or she receives on each pay day during the
Offering Period.

                  (b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. Except as described in Section 5(a) hereof, a participant may
not make any additional payments into such account.

                  (c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Administrator may, in its discretion, limit the
number of participation rate changes during any Offering Period. The change in
rate shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly.

                  (d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(c) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period.

                  (e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.

     7. Grant of Option. On the Enrollment Date of each Offering Period, each
        ---------------
Eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such participant's payroll deductions accumulated
prior to such Exercise Date and retained in the participant's account as of the
Exercise Date by the applicable Purchase Price; provided, however, that in no
                                                --------  -------
event shall a participant be permitted to purchase during each Offering Period
more than 20,000 shares of the

                                        6


<PAGE>

Company's Common Stock (subject to any adjustment pursuant to Section 19) and
during each Purchase Period more than [_____] shares of the Company's Common
Stock (subject to any adjustment pursuant to Section 19); and provided, further,
                                                              --------  -------
that such purchase shall be subject to the limitations set forth in Sections
3(c) and 13 hereof. The Administrator may, for future Offering Periods, increase
or decrease, in its absolute discretion, the maximum number of shares of the
Company's Common Stock a participant may purchase during each Purchase Period
and Offering Period. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof or
otherwise becomes ineligible to participate in the Plan. The option shall expire
on the last day of the Offering Period.

     8. Exercise of Option.
        ------------------

              (a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof or otherwise becomes ineligible to participate in the Plan,
his or her option for the purchase of shares shall be exercised automatically on
the Exercise Date, and the maximum number of full shares subject to the option
shall be purchased for such participant at the applicable Purchase Price with
the accumulated payroll deductions in his or her account. No fractional shares
shall be purchased; any payroll deductions accumulated in a participant's
account which are not sufficient to purchase a full share shall be retained in
the participant's account for the subsequent Purchase Period or Offering Period.
During a participant's lifetime, a participant's option to purchase shares
hereunder is exercisable only by him or her.

              If the Administrator determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Enrollment Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date,
the Administrator may in its sole discretion (x) provide that the Company shall
make a pro rata allocation of the shares of Common Stock available for purchase
on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner
as shall be practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase Common Stock on
such Exercise Date, and continue all Offering Periods then in effect, or (y)
provide that the Company shall make a pro rata allocation of the shares
available for purchase on such Enrollment Date or Exercise Date, as applicable,
in as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and terminate any or all Offering
Periods then in effect pursuant to Section 20 hereof. The Company may make pro
rata allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date. The balance of the amount
credited to the account of each participant which has not been applied to the
purchase of shares of stock shall be paid to such participant in one lump sum in
cash as soon as reasonably practicable after the Exercise Date, without any
interest thereon.

     9. Deposit of Shares. As promptly as practicable after each Exercise Date
        -----------------
on which a purchase of shares occurs, the Company may arrange for the deposit,
into each participant's account

                                        7


<PAGE>

with any broker designated by the Company to administer this Plan, of the number
of shares purchased upon exercise of his or her option.

     10. Withdrawal.
         ----------

                  (a) A participant may withdraw all but not less than all of
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account during the Offering Period
shall be paid to such participant as soon as reasonably practicable after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.

                  (b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.

     11. Termination of Employment. Upon a participant's ceasing to be an
         -------------------------
Eligible Employee, for any reason, he or she shall be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such participant's
account during the Offering Period shall be paid to such participant or, in the
case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, as soon as reasonably practicable and such participant's
option for the Offering Period shall be automatically terminated.

     12. Interest. No interest shall accrue on the payroll deductions or lump
         --------
sum contributions of a participant in the Plan.

     13. Shares Subject to Plan.
         ----------------------

                  (a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the Plan
shall be 250,000 shares, plus an annual increase to be added on each December 31
during the term of the Plan equal to the least of (i) 250,000 shares, (ii) 1.25%
of the Company's outstanding shares on such date or (iii) a lesser amount
determined by the Board. If any right granted under the Plan shall for any
reason terminate without having been exercised, the Common Stock not purchased
under such right shall again become available for issuance under the Plan. The
stock subject to the Plan may be unissued shares or reacquired shares, bought on
the market or otherwise.

                  (b) With respect to shares of stock subject to an option
granted under the Plan, a participant shall not be deemed to be a stockholder of
the Company, and the participant shall not have any of the rights or privileges
of a stockholder, until such shares have been issued to the

                                        8

<PAGE>

participant or his or her nominee following exercise of the participant's
option. No adjustments shall be made for dividends (ordinary or extraordinary,
whether in cash securities, or other property) or distribution or other rights
for which the record date occurs prior to the date of such issuance, except as
otherwise expressly provided herein.


     14. Administration.
         --------------

              (a) The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee as set forth below. The Board
may delegate administration of the Plan to a Committee comprised of two or more
members of the Board, each of whom is a "non-employee director" within the
meaning of Rule 16b-3 which has been adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, and the term
"Committee" shall apply to any persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise, subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. Each member of the Committee
shall serve for a term commencing on a date specified by the Board and
continuing until the member dies or resigns or is removed from office by the
Board. References in this Plan to the "Administrator" shall mean the Board
unless administration is delegated to a Committee or subcommittee, in which case
references in this Plan to the Administrator shall thereafter be to the
Committee or subcommittee.

              (b) It shall be the duty of the Administrator to conduct the
general administration of the Plan in accordance with the provisions of the
Plan. The Administrator shall have the power to interpret the Plan and the terms
of the options and to adopt such rules for the administration, interpretation,
and application of the Plan as are consistent therewith and to interpret, amend
or revoke any such rules. The Administrator at its option may utilize the
services of an agent to assist in the administration of the Plan including
establishing and maintaining an individual securities account under the Plan for
each participant. In its absolute discretion, the Board may at any time and from
time to time exercise any and all rights and duties of the Administrator under
the Plan.

              (c) All expenses and liabilities incurred by the Administrator in
connection with the administration of the Plan shall be borne by the Company.
The Administrator may, with the approval of the Board, employ attorneys,
consultants, accountants, appraisers, brokers or other persons. The
Administrator, the Company and its officers and directors shall be entitled to
rely upon the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Administrator in
good faith shall be final and binding upon all participants, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the options, and all members of the Board shall be fully protected
by the Company in respect to any such action, determination, or interpretation.


                                       9



<PAGE>

     15. Designation of Beneficiary.
         --------------------------

              (a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.

              (b) Such designation of beneficiary may be changed by the
participant at any time by written notice to the Company. In the event of the
death of a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death, the
Company shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one or
more dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.

     16. Transferability. Neither payroll deductions credited to a participant's
         ---------------
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 15 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.

     17. Use of Funds. All payroll deductions received or held by the Company
         ------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

     18. Reports. Individual accounts shall be maintained for each participant
         -------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.


     19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
         --------------------------------------------------------------------
         Merger or Asset Sale.
         --------------------

              (a) Changes in Capitalization. Subject to any required action by
                  -------------------------
the shareholders of the Company, the number of shares of Common Stock which have
been authorized for issuance under the Plan but not yet placed under option, the
maximum number of shares each participant may purchase each Purchase Period
(pursuant to Section 7), as well as the price per share and the number of shares
of Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
                                                          --------  -------
that

                                       10

<PAGE>

conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.

              (b) Dissolution or Liquidation. In the event of the proposed
                  --------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Administrator. The
New Exercise Date shall be before the date of the Company's proposed dissolution
or liquidation. The Administrator shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.

              (c) Merger or Asset Sale. In the event of a proposed sale of all
                  --------------------
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a New Exercise Date and any
Offering Periods then in progress shall end on the New Exercise Date. The New
Exercise Date shall be before the date of the Company's proposed sale or merger.
The Administrator shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.

     20. Amendment or Termination.
         ------------------------

              (a) The Board may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 19 hereof, no such termination can
affect options previously granted, provided that an Offering Period may be
terminated by the Board if the Board determines that the termination of the
Offering Period or the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 19 and this Section 20 hereof, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any participant without the consent of such participant.
To the extent necessary to comply with Section 423 of the Code (or any successor
rule or provision or any other applicable law, regulation or stock exchange
rule), the Company shall obtain stockholder approval in such a manner and to
such a degree as required.

              (b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Administrator shall be entitled to change

                                       11


<PAGE>

the Offering Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Administrator determines in its sole discretion
advisable which are consistent with the Plan.

              (c) In the event the Board determines that the ongoing operation
of the Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or desirable, modify
or amend the Plan to reduce or eliminate such accounting consequence including,
but not limited to:

                         (i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;

                         (ii) shortening any Offering Period so that the
Offering Period ends on a new Exercise Date, including an Offering Period
underway at the time of the Administrator action; and

                         (iii) allocating shares.

     Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.

     21. Notices. All notices or other communications by a participant to the
         -------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

     22. Conditions To Issuance of Shares. The Company shall not be required to
         --------------------------------
issue or deliver any certificate or certificates for shares of Stock purchased
upon the exercise of options prior to fulfillment of all the following
conditions:

              (a) The admission of such shares to listing on all stock
exchanges, if any, on which is then listed; and

              (b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Administrator shall, in its absolute discretion, deem necessary
or advisable; and

                                       12


<PAGE>

              (c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable; and

              (d) The payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the option; and

              (e) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may from time to time establish for
reasons of administrative convenience.

     23. Term of Plan. The Plan shall become effective on the Effective Date.
         ------------
Subject to approval by the stockholders of the Company in accordance with this
Section, the Plan shall be in effect for a term of ten (10) years commencing on
the date of the initial adoption of the Plan by the Board, unless sooner
terminated under Section 20 hereof. The Plan shall be submitted for the approval
of the Company's stockholders within twelve (12) months after the date of the
initial adoption of the Plan by the Board.

     24. Automatic Transfer to Low Price Offering Period. To the extent
         -----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules, if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then (i) a new twenty-four (24) month Offering Period
will automatically begin on the first trading day following that Exercise Date,
and (ii) all participants in such Offering Period shall be automatically
withdrawn from such Offering Period immediately after the exercise of their
option on such Exercise Date and automatically re-enrolled in the immediately
following Offering Period as of the first day thereof.

     25. Equal Rights and Privileges. All Eligible Employees of the Company (or
         ---------------------------
of any Designated Subsidiary) will have equal rights and privileges under this
Plan so that this Plan qualifies as an "employee stock purchase plan" within the
meaning of Section 423 of the Code or applicable Treasury regulations
thereunder. Any provision of this Plan that is inconsistent with Section 423 or
applicable Treasury regulations will, without further act or amendment by the
Company, the Board or the Administrator, be reformed to comply with the equal
rights and privileges requirement of Section 423 or applicable Treasury
regulations.

     26. No Employment Rights. Nothing in the Plan shall be construed to give
         --------------------
any person (including any Eligible Employee or participant) the right to remain
in the employ of the Company, a Parent or a Subsidiary or to affect the right of
the Company, any Parent or any Subsidiary to terminate the employment of any
person (including any Eligible Employee or participant) at any time, with or
without cause.

     27. Notice of Disposition of Shares. Each participant shall give prompt
         -------------------------------
notice to the Company of any disposition or other transfer of any shares of
stock purchased upon exercise of an option if such disposition or transfer is
made: (a) within two (2) years from the Enrollment Date of the Offering Period
in which the shares were purchased or (b) within one (1) year after the Exercise
Date on which such shares were purchased. Such notice shall specify the date of
such disposition or

                                       13

<PAGE>

other transfer and the amount realized, in cash, other property, assumption of
indebtedness or other consideration, by the participant in such disposition or
other transfer.

                                       14

<PAGE>

                                    *******

     I hereby certify that the foregoing Plan was adopted by the Board of
Directors of R2 Technology, Inc. on December 20, 2001.

    Executed at Menlo Park, California on this 21st day of December, 2001.



                                /s/ Alan C. Mendelson
                                ----------------------------------------------
                                Secretary


                                     *****


     I hereby certify that the foregoing Plan was approved by the stockholders
of R2 Technology, Inc. on                    , 2002.
                         --------------------
     Executed at                      , California on this       day of
                 ---------------------                     -----
                      , 2002.
----------------------




                                -----------------------------------------------
                                Secretary