Document:

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                                                                  EXHIBIT 10.71

                                                        Document number: 2006793

                                 LEASE AGREEMENT

                Produced by Land Development Agency in Sheng Zhen

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                                 LEASE AGREEMENT

Landlord:    LEGEND TECH.
             -----------

Address:     Hi-Tech Industrial Zone, Nan Shen District, Shenzhen

"Lease Permit" number:    G14875

Tenant:      UTSTARCOM
             ---------

Address:     4th Floor, Wearnes Technology Building, Science & Industry Park,
             Nantou SZ 51806

     Pursuant to "Lease Regulation of Sheng Zhen Economic District" and its
relevant executive rules, this Lease Agreement is made and entered into by and
between LEGEND TECH, hereinafter referred to as "Landlord", and UTSTARCOM,
hereinafter referred to as "Tenant".

Lease Agreement is as follows:

   1.   Landlord hereby leases Legend Research and Development Center located in
NanShen, Sheng Zhen, hereinafter referred to as "the Premises", to Tenant. The
Premises hereby leased to Tenant are nine thousand nine hundred and ninety six
square feet.

   2.   The term of the lease is three years. The lease term commences on
September 10, 2001 and will be expire on September 9, 2004.

   3.   Landlord leases the Premises to Tenant for purposes of general office,
research and development. Landlord warrants compliance with relevant national
safety standards. However, Tenant shall obtain Landlord's consent in the event
of using the Premises for purposes described otherwise. Tenant shall obtain all
licenses and permits necessary for changing its use of the Premises.

   4.   Landlord warrants compliance with all governmental laws, ordinances

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and regulations applicable to permitted use of the Premises described in section
3 of the Lease Agreement. Tenant warrants compliance with all governmental laws,
ordinances and regulations concerning Tenant's use of the Premises.

     5.   The monthly rent of the Premises is calculated by square feet. The
second floor with a total of five thousand four hundred and fifty square feet is
calculated monthly at sixty three RMP per square foot. The third floor with a
total of four thousand five hundred and forty six square feet is calculated
monthly at seventy RMP per square foot. The total amount of monthly rent of the
Premises is six hundred sixty one thousand five hundred and seventy RMP. The
rental payment is due and payable to Landlord by Tenant on or before the tenth
of each month.

     6.   Landlord shall deliver possession of the Premises to Tenant on or
before September 10, 2001. In the event Landlord fails to deliver possession on
time, Tenant may require extension of the lease term upon written confirmation
by both parties.

     7.   During the lease term, Landlord agrees to pay real property taxes,
assessment of lands for rentals and rental management fees; Tenant agrees to pay
utilities and management fees of the Premises.

     8.   Landlord shall advances the expenses payable by Tenant for the first
month of the lease term. Tenant shall reimburse Landlord of the payment within
10 days after one month using the Premises. Thereafter, all payments shall be
made in advance by Tenant. The amount of advanced payment is based on the actual
expenses in the previous month. Landlord shall provide vouchers to Tenant in
accounting all payments. Landlord is entitled to demand payment if Tenant fails
to make one month advanced payment. Except as otherwise provided, Landlord is
entitled to stop Tenant's use of the Premises in the event Tenant fails to make
such advanced payment.

     9.   Security Deposit is allowed in this Lease Agreement. Landlord may
charge Tenant two-month rental, which is one million three hundred twenty three
thousand one hundred and forty RMP as security deposit. Landlord shall provide
Tenant with vouchers upon reception of such deposit. Landlord and Tenant shall
comply with all provisions in the Lease Agreement or shall be held liable in
accordance with laws in the event of breach.

     10.   Landlord warrants compliances with all laws, ordinances and
regulations concerning safety of the Premises and facilities within. Tenant
shall use the Premises and all facilities properly to avoid damage. Upon
expiration or termination of the Lease Agreement, Tenant shall vacate and yield
up possession of the Premises to Landlord and warrant good condition of the
Premises and facilities, except as ordinary wear and tear. All payments due and
payable by Tenant shall be made at the same time.

     11.   During Tenant's use of the Premises, Tenant shall give prompt notice
of defects or need for repairs to Landlord in the event such condition demands;
Landlord shall commence repair within three days after reception of Tenant's
notice. If Tenant is

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unable to give notice to Landlord or Landlord fails to repair, Tenant may
initiate repair on behalf of Landlord in the witness of the agreement registered
agency. Landlord is responsible for the cost of repair, including such repair by
Tenant.

     12.   If the damage or malfunction of the Premises or facilities is caused
by Tenant's improper or unreasonable use of the Premises or facilities, Tenant
shall be liable for timely repair or the cost of repair. If Tenant fails to make
repairs, Landlord may initiate repairs on behalf of Tenant in the witness of the
agreement registered agency. Tenant is responsible for the cost of such repairs.

     13.   During the lease term, Tenant's consent is required in the event
Landlord determines to make any alterations, additions or improvements to the
Premises. The approval of Government authority is also required. Landlord and
Tenant shall make other written agreement with respect of the event described
above. During the lease term, Tenant may make alterations, additions or
improvements to the Premises subject to consents by Landlord and Government
authority. Landlord and Tenant shall make other written agreement with respect
to the event described above.

     14.   Without Landlord's consent, Tenant shall not have the right to
assign, transfer or sublet all or part of the Premises to a third party. Upon
Landlord's consent, Tenant shall register the assignment or sublease under the
governing agency. However, the expiration date of the assignment or sublease
shall not be later than the expiration date of this Lease Agreement. Tenant
warrants that the Premises shall not be assigned, transferred, or sublet by
assignee, transferee or sublessee.

     15.   During the lease term, Landlord shall notify Tenant one month earlier
in the event of assigning or transferring all or part of the Premises. Tenant is
entitled the first right of refusal under the same terms. If the Premises are
assigned or transferred to a third party, Landlord shall assure that assignee or
transferee assume the obligations of this Lease Agreement.

     16.   During the lease term, the Lease Agreement is terminated upon
occurrence of the following events:

           (1)    The obligations of the Lease Agreement cannot be fulfilled as
a result of causes beyond reasonable control;

           (2)    If the Premises should be taken for any public use by the
government or by right of eminent domain;

           (3)    The invalidation or expiration of Landlord's "rental permit
for the Premises".

           If the Lease Agreement is terminated due to occurrence of section
16(3) and result in Tenant's loss, Tenant is entitled to recover the loss from
Landlord.

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      17.    Landlord may terminate the lease upon occurrence of the following
events. Tenant shall indemnify Landlord's loss resulted from termination of the
Lease Agreement.
             (1)    Tenant fails to pay rental in excess of one month;

             (2)    The amount of overdue payments is in excess of ten thousand
RMP;

             (3)    Tenant changes the use of the Premises unilaterally without
Consents from Landlord and Government authority;

             (4)    Tenant fails to make repairs or pay the cost of repairs in
violation of section 12 of this Lease Agreement, which causes severe damage to
the Premises or facilities within;

             (5)    Tenant makes alterations, additions or improvements to the
Premises without obtaining written consents from Landlord and Government
authority;

             (6)    Tenant assigns, transfers or subleases the Premises to a
third party without Landlord's written consent.

             In the event of terminating the Lease Agreement upon occurrence of
the events described above, Landlord shall give written notice to Tenant to
vacate and return possession of the Premises. The remaining balance of advanced
payments must return to Tenant. However, Landlord is not obliged to return the
security deposit.

      18.    Tenant may terminate the lease upon occurrence of the following
events. Landlord shall indemnify Tenant's loss resulted from termination of the
Lease Agreement.

             (1)    Landlord fails to deliver possession of the Premises in
excess of one month;

             (2)    Tenant cannot use the Premises as permitted as a result of
Landlord's failure to comply with section 4 of this Lease Agreement;

             (3)    Tenant cannot use the Premises as permitted as a result of
Landlord's failure to repair or pay the cost of repairs pursuant to section 11
of this Lease Agreement;

             (4)    Landlord makes alternations, additions or improvements to
the Premises without consents of Tenant and Government authority.

             In the event of terminating the Lease Agreement upon occurrence of
the

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events described above, Tenant shall give written notice to Landlord of vacating
and yielding up possession of the Premises. Tenant is entitled recovery of
doubled security deposit and a penalty of six hundred thousand RMP and remaining
balance of advanced payments made by Tenant.

      19.    Tenant shall make request to Landlord with respect to extension of
the lease term no later than three months before the expiration date of the
lease; Landlord shall provide Tenant the first right of refusal under the same
term if the Premises are continued to be leased. Landlord and Tenant shall make
new lease agreement if agreed to continue the lease and register the new
agreement under governing agency.

      20.    Within five days after the termination or expiration of the lease,
Tenant shall vacate and yield up immediate possession of the Premises to
Landlord. Landlord may file suit against Tenant in People's court in the event
Tenant fails to vacate and yield up possession of the Premises.

      21.    In the event Tenant fails to pay any installment of rent when such
installment is due, Tenant is liable for a late charge in an amount equal to
point three percent of such installment multiplied by days overdue.

      22.    In the event Tenant assigns, transfers or sublets all or part of
the Premises unilaterally, Tenant is liable for a penalty in an amount of
monthly seventy RMP per square feet assigned, transferred, or subleased.

      23.    In the event Landlord or Tenant fails to fulfill obligations
incurred under this Lease Agreement that results in losses, the non-breaching
party is entitled recovery of actual losses and foreseeable profits.

      24.    The Supplement Agreement entered into by Landlord and Tenant
attached hereto is incorporated herein by reference into and made a part of this
Lease Agreement. Landlord and Tenant may make supplement agreement for
situations not covered in this Lease Agreement and such supplement shall
register under governing agency. The supplement agreement is as the same effect
as this Lease Agreement.

      25.    In the event disputes arising from the Lease Agreement, Landlord
and Tenant shall resort to mediation; Petition for arbitration in Sheng Zhen
arbitration committee may be filed in the event mediation is not successful.

      26.    The Lease Agreement in Chinese controls.

      27.    This Lease Agreement is executed in five counterparts.  Landlord
retains one copy, Tenant retains two copies and the agreement registered agency
retains two copies.

      28.    The Lease Agreement is effective upon due execution.

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     Landlord (seal and signature):

     Representative:

     Telephone number:

     Bank Account:

     Authorized Agent (seal and signature):

     Tenant (seal and signature):

     Representative:

     Telephone number:

     Bank Account:

     Authorized Agent (seal and signature):      Date: August 31, 2001.

     Registrant (seal and signature):            Date: September 12, 2001.

     Agreement Registered Agency:                Date: September 12, 2001.
     (seal and signature)

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                              Supplement Agreement

     Landlord: LEGEND TECH                                      Tel no: 6983988

     Tenant: UTSTARCOM                                          Tel no: 6635333

     Pursuant to "Lease Regulation of Sheng Zhen Economic District" and its
relevant executive rules, Landlord and Tenant hereby enter into this Supplement
Agreement to be incorporated into and made a part of the Lease Agreement
attached hereto (Lease Agreement number: 2006793) with respect to situations not
covered in the Lease Agreement.

     1. Premises.

        Landlord hereby agrees to lease the Premises located in Legend Research
and Development Center at South First Avenue in South High Technology Area in
Sheng Zhen, China, hereinafter referred to as "the Premises", to Tenant. The
rental area in second and third floors of the Premises is nine thousand nine
hundred and ninety six square feet (based on the computation by governing
agency, including common area shared by the Premises.)

     2. Rent and Others.

        Rent: The second floor with a total of five thousand four hundred and
fifty square feet is calculated monthly at sixty three RMP per square feet. The
monthly rent for second floor is three hundred forty three thousand three
hundred and fifty RMP; the third floor with a total of four thousand five
hundred and forty six square feet is calculated monthly at seventy RMP per
square feet. The monthly rent for third floor is three hundred eighteen thousand
two hundred and twenty RMP. The total amount of monthly rent is six hundred
sixty one thousand five hundred and seventy RMP. The rent for the Premises is
locked for two years. Rent adjustment in the third year shall be negotiated by
Landlord and Tenant. (Rent includes real property taxes, assessment of lands for
rentals and rental management fees.)
        Parking: Landlord shall provide Tenant with thirty three designated
parking spaces, ten of which shall be ground parking while the other twenty
three parking spaces may be underground.
        Trade Fixtures: Landlord hereby agrees to lease the Premises to Tenant
free of rent for three months for the purpose of trade fixtures installing.
However, Tenant agrees to pay management fees of the Premises and utilities
used on or from the Premises (including proportionate utilities of common area
not separately metered to Tenant.) Landlord shall deliver possession of the
Premises to Tenant no later than three days after execution of the Lease
Agreement. If Landlord fails to deliver possession of the Premises on time, the
lease term can be extended upon negotiations by Landlord and Tenant. The
calculation of rent commences on December 10, 2001.

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        Others:

                (1)      In consideration of the obligation of Tenant to pay
usage fee as herein provided, Landlord hereby agrees to provide the side of
South Avenue of the Premises for installment of Tenant's signs. (Landlord and
Tenant's signs of the companies shall be installed in the same manner and format
on the Premises.) The annual usage fee is eighty thousand RMP. The calculation
of usage fee commences upon the date of use by Tenant. The usage fee can be made
in two installments. (Forty thousand RMP is due and payable no later than three
days after usage for half a year, the remaining forty thousand RMP is due and
payable by the end of the year of usage.)

                (2)      Landlord hereby agrees to allow Tenant to place a test
antenna on the top of the Premises free of charge. The height of the antenna
shall not be in excess of five feet. Tenant shall comply with all laws or
regulations with respect of placing the test antenna. The exact location of
placing the test antenna shall be negotiated and confirmed by Landlord and
Tenant.

     3. Security Deposit.

        Tenant hereby agrees to pay Landlord a security deposit in the amount of
two-months rent before taking possession of the Premises. (One million three
hundred twenty three thousand one hundred and forty RMP.) The security deposit
shall be returned by Landlord free of interest to Tenant at such time after
termination or expiration of the lease that all of Tenant's obligations under
this lease have been fulfilled.

     4. Monthly Utilities.

        The utility of the Premises is metered in accordance with relevant
regulations by Sheng Zhen city. Tenant shall pay all water, gas and other
utilities used on or from the Premises; Tenant shall also pay the proportionate
utilities of common areas not separately metered to Tenant pursuant to
"Proportion Rules of Research and Development Center utilities".

     5. Term and Termination of the Lease.

                (1)      The term of the lease is three years. The term
commences on September 10, 2001 and will expire on September 9, 2004. Tenant
shall make written request to Landlord with respect to extension of the lease
term no later than three months before the expiration date of the lease. Upon
Landlord's consent, Tenant may continue to lease the Premises.

                (2)      During the lease term, Landlord shall give notice to
Tenant no later than three months before assigning or transferring all or part
of the Premises. Landlord shall provide Tenant the first right of refusal under
the same term if the Premises are to be assigned or transferred. If the Premises
are assigned or transferred to a third party, Landlord shall assure that the
assignee or transferee assumed obligations of this Lease Agreement.

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                (3)      During the lease term, Tenant would not be entitled
recovery of the security deposit if failing to give written notice to Landlord
no later than three month before termination of the lease.

     6. Management of the Premises.

        The Premises are managed by Sheng Zhen Mid Sea Management Company,
hereinafter referred to as "Management Company". Tenant shall enter into
contract with Management Company concerning the Premises immediately after
execution of this Lease Agreement. The detailed content and service items are
described in resident's covenant. The management fee of the Premises is ten
dollars and eighty three cents RMP per month. Adjustment of management fee of
the Premises upon expiration of this Lease Agreement shall not be made without
consent of the association committee of the Premises.

     7. Payment.

                (1)      The monthly rent is due and payable by Tenant on or
before the tenth of every month. The rent payment shall be made to a Landlord's
designated account, or directly to Landlord's treasury department. Landlord is
not obliged to give written notice of rent payment to Tenant. In the event
Tenant fails to pay any installment of rent when such installment is due, Tenant
is liable for a late charge in an amount equal to point three percent of such
installment multiplied by days overdue.

                (2)      Landlord shall provide Tenant with receipt upon
reception of the security deposit; Landlord shall also provide Tenant with
formal rental vouchers upon reception of rent payment made by Tenant.

     8. Purposes and Regulations.

                (1)      The Premises shall be used for the purposes of general
office, research and development purposes. (The Premises are currently vacant
for rental.)

                (2)      Landlord warrants the lawfulness of permitted use
described above. Landlord also warrants the Premises are in conformity with
national safety standards. (Tenant shall obtain approval from Government
authority as to installment of trade fixtures or alterations to the Premises.
Extinguishers in the Premises shall be furnished by Tenant.)

                (3)      Landlord warrants compliance with all governmental
laws, ordinances and regulations applicable to permitted use of the Premises.

                (4)      Tenant warrants compliance with all governmental laws,
ordinances and regulations during the use of the Premises.

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                (5)      Tenant shall not erect unauthorized buildings around
common areas of the Premises. Landlord is entitled to demand possession of the
Premises if otherwise. Tenant is liable for all losses resulted therein.

     9. Possession Delivery and Maintenance.

                (1)      Landlord warrants the Premises and facilities are in
conformity with all applicable governmental laws, ordinances and regulations.
Tenant shall use the Premises and facilities properly to avoid unreasonable
damage. Upon termination or expiration of the lease, Tenant shall vacate and
yield up possession of the Premises to Landlord and warrant good condition of
the Premises and facilities, except ordinary wear and tear. All expenses due and
payable by Tenant shall be made at the same time.

                (2)      During Tenant's use of the Premises, Tenant shall
give prompt notice of defects or needs to repair to Landlord in the event such
condition demands; Landlord shall commence repair within three days after
reception of notice from Tenant. If Landlord fails to repair, Tenant may
initiate repairs on behalf of Landlord in the witness of the agreement
registered agency. Landlord is responsible for the cost of repairs in both given
situations.

                (3)      If the damage or malfunction of the Premises or
facilities is caused by Tenant's improper or unreasonable use of the Premises or
facilities, Tenant shall be liable for timely repair or the cost of repair. If
Tenant fails to repair, Landlord may initiate repair on behalf of Tenant in the
witness of the agreement registered agency. Tenant is responsible for the cost
of such repair.

                (4)      During the lease term, Tenant shall give written notice
to Landlord and obtain consent from Government authority no later than thirty
days before making alterations, additions, improvements or trade fixtures
installments to the Premises. In the event of emergencies, such as typhoon,
earthquake, fire or burglary, etc., Management Company and Landlord have the
right to enter the Premises for emergency without giving notice to Tenant.

                (5)      During the lease term, upon obtaining consents from
Landlord and Government authority, Tenant may make alterations, additions,
improvements or trade fixture installments to the Premises.

     10. Remedies for Breach of this Agreement.

                (1)      Upon occurrence of the following events, Landlord has
the right to stop furnishing water, gas and other utility services. Tenant is
liable for losses resulted therein.

                         a. Tenant fails to pay rental in excess of one month;

                         b. The amount of overdue payment by Tenant is in excess
of ten thousand RMP;

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                        c. Tenant changes the use of the Premises unilaterally
without obtaining consents from Landlord and Government authority;

                        d. Tenant assigns, transfers or sublets all or part of
the Premises to third party without Landlord's consent;

                        e. Tenant fails to make repair or pay the cost of repair
in violation of section 9(3) of this Supplement Agreement, which causes severe
damage to the Premises or facilities within;

                        f. Tenant makes alterations, additions, improvements or
trade fixture installments to the Premises without consents from Landlord and
Government authority in violation of section 9(5) of the Supplement Agreement.

                        Upon occurrence of the events described above, Landlord
is entitled to terminate the lease unilaterally and repossess the Premises after
giving written notice to Tenant. The remaining balance of advanced payments made
by Tenant shall be returned to Tenant. However, Landlord is not obliged to
return the safety deposit.

                (2)     Upon occurrence of the following events, Tenant has the
right to terminate the lease. Landlord is liable for losses resulted therein.

                        a. Landlord fails to deliver possession of the Premises
in excess of one month;

                        b. Tenant is not able to use the Premises as permitted
due to Landlord's violation of section 8(3) of the Supplement Agreement;

                        c. Tenant is not able to use the Premises due to
Landlord's failure to make repairs or pay the cost of repair without causes in
violation of section 9(2) of the Supplement Agreement;

                        d. Landlord shall not make alterations, additions or
improvements to the Premises without obtaining consents from Tenant and
Government authority.
                        Upon occurrence of the events described above, Tenant is
entitled to terminate the lease unilaterally and vacate the Premises after
giving written notice to Landlord. Tenant is entitled to recovery of doubled
security deposit, a penalty in an amount of six hundred thousand RMP by Landlord
and the remaining balance of advanced payments made by Tenant.

     11. Vacation of the Premises.

                (1)     Tenant shall give written notice to Landlord no later
than three

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months before vacating of the Premises if such is earlier than the expiration
date of the lease. Upon inspection of the Premises by Landlord, the security
deposit shall be returned to Tenant free of interest if Tenant fulfills all
obligations incurred in this Agreement.

                (2)      Upon expiration, termination of the lease or earlier
vacating of the Premises, Tenant shall not remove or damage the annexed fixtures
to the Premises, including but not limited to doors, windows, walls, ceilings,
lights, air holes and electricity facilities; However, Tenant shall remove
fixtures that are deemed unnecessary to keep or as garbage by both parties. In
the event Tenant removes trade fixtures such as air conditioning at Tenant's own
expenses, Tenant shall restore the Premises to their original condition. Tenant
shall complete removal and vacation of the Premises within five days.

     12. The Lease Agreement is terminated automatically upon occurrence of the
following events during the lease term:

                (1)      The obligations of the Lease Agreement cannot be
fulfilled as a result of causes beyond reasonable control;

                (2)      If the Premises should be taken for any public use by
the government or by right of eminent domain;

                (3)      The invalidation or expiration of Landlord's "rental
permit for the Premises".

                Tenant is entitled to recovery of the losses resulted from
termination of the Lease Agreement due to section 12(3).

     13. Dispute Resolution.

                (1)      Landlord and Tenant may make any supplement agreement
with respect to situations not covered in this Agreement during the lease term.
In the event disputes arise from the Lease Agreement, Landlord and Tenant shall
resort to mediation; Petition for arbitration in Sheng Zhen arbitration
committee may be filed in the event mediation is not successful.

                (2)      The Lease Agreement is hereby agreed and entered into
by Landlord and Tenant. This Lease Agreement is effective upon due execution by
both parties. The Agreement is executed in five counterparts. Both parties
retain two copies and the agreement registered agency retains one copy of the
Agreement.

     14. Miscellaneous.

                (1)      Landlord shall execute formal "Lease Agreement" of
Sheng Zhen

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Land Development Agency with Tenant on or before February 10, 2001. Tenant may
request recovery of losses from Landlord in the event of failure to execute the
formal Lease Agreement. "Lease Agreement" is in the same effect as this
Supplement Agreement. In the event of conflict between "Lease Agreement"
(agreement number:2006793) and this Supplement Agreement, Supplement
Agreement controls.

     (2) Correspondence between Landlord and Tenant in Chinese controls.

     (3) Chinese interpretation of this Agreement controls.

     (4) The Agreement is hereby agreed and entered into by Landlord and Tenant.
The Supplement Agreement is effective upon due execution by both parties. The
Supplement Agreement is executed in five counterparts. Both parties retain two
copies and the agreement registered agency retains one copy of the Agreement.

Landlord: /s/ LEGEND TECH                       Tenant: /s/ UTSTARCOM, Inc.
          ---------------                               -------------------

Bank:                                           Bank:
Account number:                                 Account number:
Representative:                                 Representative:
Date:                                           Date:

Registrant:

Agreement Registered Agency:

Date:

Executed in Legend Research and Development Center in Sheng Zhen, China.

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                            Translation Certification
                            -------------------------

         I hereby certify that the foregoing represents a fair and accurate
English translation of the original Chinese document.

Dated:  February 8, 2002

                                By: /s/ Michael J. Sophie
                                    ----------------------------------------
                                     Michael J. Sophie
                                     Chief Financial Officer

                                       15<PAGE>
                                                                    Exhibit 10.2

                               R2 TECHNOLOGY, INC.
                             a Delaware corporation

                   AMENDED AND RESTATED 1996 STOCK OPTION PLAN

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
1.    Purposes of the Plan ..............................................    1
      --------------------
2.    Definitions .......................................................    1
      -----------
3.    Stock Subject to the Plan .........................................    4
      -------------------------
4.    Administration of the Plan ........................................    5
      --------------------------
5.    Eligibility .......................................................    7
      -----------
6.    Limitations .......................................................    7
      -----------
7.    Term of Plan ......................................................    7
      ------------
8.    Term of Option ....................................................    7
      --------------
9.    Option Exercise Price and Consideration ...........................    8
      ---------------------------------------
10.   Exercise of Option ................................................    9
      ------------------
11.   Non-Transferability of Options ....................................   11
      ------------------------------
12.   Stock Purchase Rights .............................................   12
      ---------------------
13.   Adjustments upon Changes in Capitalization, Merger or Asset Sale ..   12
      ----------------------------------------------------------------
14.   Time of Granting Options ..........................................   14
      ------------------------
15.   Amendment and Termination of the Plan .............................   14
      -------------------------------------
16.   Stockholder Approval ..............................................   15
      --------------------
17.   Inability to Obtain Authority .....................................   15
      -----------------------------
18.   Reservation of Shares .............................................   15
      ---------------------
19.   Information to Holders and Purchasers .............................   15
      -------------------------------------
20.   Repurchase Provisions .............................................   15
      ---------------------
21.   Investment Intent .................................................   16
      -----------------
22.   Governing Law .....................................................   16
      -------------
</TABLE>

                                       i

<PAGE>

                               R2 TECHNOLOGY, INC.
                             a Delaware corporation

               SECOND AMENDED AND RESTATED 1996 STOCK OPTION PLAN

     1.  Purposes of the Plan. The purposes of this R2 Technology, Inc., Second
         --------------------
Amended and Restated 1996 Stock Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to Employees, Directors and Consultants and to promote the
success of the Company's business. Options granted under the Plan may be
Incentive Stock Options or Non-Qualified Stock Options, as determined by the
Administrator at the time of grant.

     2.  Definitions. As used herein, the following definitions shall apply:
         -----------

         (a)  "Acquisition" means (i) any consolidation or merger of the Company
               -----------
with or into any other corporation or other entity or person in which the
stockholders of the Company prior to such consolidation or merger own less than
fifty percent (50%) of the Company's voting power immediately after such
consolidation or merger, excluding any consolidation or merger effected
exclusively to change the domicile of the Company; or (ii) a sale of all or
substantially all of the assets of the Company.

         (b)  "Administrator" means the Board or the Committee responsible for
               -------------
conducting the general administration of the Plan, as applicable, in accordance
with Section 4 hereof.

         (c)  "Applicable Laws" means the requirements relating to the
               ---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are granted under the Plan.

         (d)  "Board" means the Board of Directors of the Company.
               -----

         (e)  "Cause" means a Service Provider's (i) willful misconduct or
               -----
dereliction in the performance of his or her duties to the Company or its
successor, (ii) breach of any of the Company's or its successor's material
employment policies, (iii) dishonesty or misrepresentation involving the Company
or its successor, (iv) unauthorized use of trade secrets or confidential
information, (v) violation of any covenants regarding non-competition and/or
non-solicitation, or (vi) conviction of or plea of guilty or nolo contendere to
felony criminal conduct.

         (f)  "Code" means the Internal Revenue Code of 1986, as amended, or any
               ----
successor statute or statutes thereto. Reference to any particular Code section
shall include any successor section.

         (g)  "Committee" means a committee appointed by the Board in accordance
               ---------
with Section 4 hereof.

<PAGE>

         (h)  "Common Stock" means the Common Stock of the Company, par value
               ------------
$0.001 per share.

         (i)  "Company" means R2 Technology, Inc., a Delaware corporation.
               -------

         (j)  "Consultant" means any consultant or adviser if: (i) the
               ----------
consultant or adviser renders bona fide services to the Company or any Parent or
Subsidiary of the Company; (ii) the services rendered by the consultant or
adviser are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company's securities; and (iii) the consultant or
adviser is a natural person who has contracted directly with the Company or any
Parent or Subsidiary of the Company to render such services.

         (k)  "Director" means a member of the Board.
               --------

         (l)  "Employee" means any person, including an Officer or Director, who
               --------
is an employee (as defined in accordance with Section 3401(c) of the Code) of
the Company or any Parent or Subsidiary of the Company. A Service Provider shall
not cease to be an Employee in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive
Stock Options, no such leave may exceed ninety (90) days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient, by itself, to constitute "employment" by the Company.

                                       2

<PAGE>

         (m)  "Exchange Act" means the Securities Exchange Act of 1934, as
               ------------
amended, or any successor statute or statutes thereto. Reference to any
particular Exchange Act section shall include any successor section.

         (n)  "Fair Market Value" means, as of any date, the value of a share 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 a share of 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 time of determination, 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 between the high bid and low asked prices for a share of the
Common Stock on the last market trading day prior to the day of determination;
or

              (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.

         (o)  "Holder" means a person who has been granted or awarded an Option
               ------
or who holds Shares acquired pursuant to the exercise of an Option.

         (p)  "Incentive Stock Option" means an Option intended to qualify as an
               ----------------------
incentive stock option within the meaning of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Administrator.

         (q)  "Independent Director" means a Director who is not an Employee of
               --------------------
the Company.

         (r)  "Non-Qualified Stock Option" means an Option (or portion thereof)
               --------------------------
that is not designated as an Incentive Stock Option by the Administrator, or
which is designated as an Incentive Stock Option by the Administrator but fails
to qualify as an incentive stock option within the meaning of Section 422 of the
Code.

         (s)  "Officer" means a person who is an officer of the Company within
               -------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

         (t)  "Option" means a stock option granted pursuant to the Plan.
               ------

         (u)  "Option Agreement" means a written agreement between the Company
               ----------------
and a Holder evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.

                                       3

<PAGE>

         (v)  "Parent" means any corporation, whether now or hereafter existing
               ------
(other than the Company), in an unbroken chain of corporations ending with the
Company if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing more than fifty percent of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

         (w) "Plan" means the R2 Technology, Inc., Second Amended and Restated
              ----
1996 Stock Option Plan.

         (x)  "Public Trading Date" means the first date upon which Common Stock
               -------------------
of the Company is listed (or approved for listing) upon notice of issuance on
any securities exchange or designated (or approved for designation) upon notice
of issuance as a national market security on an inter-dealer quotation system.

         (y)  "Restricted Stock" means Shares acquired pursuant to the exercise
               ----------------
of an unvested Option in accordance with Section 10(h).

         (z)  "Rule 16b-3" means that certain Rule 16b-3 under the Exchange Act,
               ----------
as such Rule may be amended from time to time.

         (aa) "Section 16(b)" means Section 16(b) of the Exchange Act, as such
               -------------
Section may be amended from time to time.

         (bb) "Securities Act" means the Securities Act of 1933, as amended, or
               --------------
any successor statute or statutes thereto. Reference to any particular
Securities Act section shall include any successor section.

         (cc) "Service Provider" means an Employee, Director or Consultant.
               ----------------

         (dd) "Share" means a share of Common Stock, as adjusted in accordance
               -----
with Section 13 below.

         (ee) "Stock Purchase Right" means a right to purchase Common Stock
               --------------------
pursuant to a written offer made to a Service Provider by the Company containing
the terms, conditions and restrictions related to the offer, including the
number of Shares that such person shall be entitled to purchase, the price to be
paid, and the time within which such person must accept such offer.

         (ff) "Subsidiary" means any corporation, whether now or hereafter
               ----------
existing (other than the Company), in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing more than fifty percent
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

     3.  Stock Subject to the Plan.
         -------------------------

                                       4

<PAGE>

         (a)  Subject to the provisions of Section 13 of the Plan, the shares of
stock subject to Options shall be Common Stock, initially shares of the
Company's Common Stock, par value $0.001 per share. Subject to the provisions of
Section 13 of the Plan relating to adjustments upon changes in capitalization,
the maximum aggregate number of Shares which may be issued upon exercise of such
Options is 3,750,000 shares, plus an annual increase to be added on each
December 31 during the term of the Plan equal to the least of (i) 625,000 shares
or (ii) a lesser amount determined by the Board.

         (b)  Shares issued upon exercise of Options may be authorized but
unissued, or reacquired Common Stock. If an Option expires or becomes
unexercisable without having been exercised in full, the unpurchased Shares that
were subject thereto shall become available for future grant or sale under the
Plan (unless the Plan has terminated). Shares that are delivered by the Holder
or withheld by the Company upon the exercise of an Option under the Plan, in
payment of the exercise price thereof or tax withholding thereon, may again be
optioned, granted or awarded hereunder, subject to the limitations of this
Section 3. If Shares of Restricted Stock are repurchased by the Company at their
original purchase price, such Shares shall become available for future grant
under the Plan. Notwithstanding the provisions of this Section 3, no Shares may
again be optioned, granted or awarded if such action would cause an Incentive
Stock Option to fail to qualify as an Incentive Stock Option under Code Section
422.

     4.  Administration of the Plan.
         --------------------------

         (a)  Administrator. Unless and until the Board delegates administration
              -------------
to a Committee as set forth below, the Plan shall be administered by the Board.
The Board may delegate administration of the Plan to a Committee or Committees
of one or more members of the Board, and the term "Committee" shall apply to any
person or 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 (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. Notwithstanding the foregoing,
however, from and after the Public Trading Date, a Committee of the Board shall
administer the Plan and the Committee shall consist solely of two or more
Independent Directors each of whom is both an "outside director," within the
meaning of Section 162(m) of the Code, and a "non-employee director" within the
meaning of Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (i) delegate to a committee of one or more members of the Board
who are not Independent Directors the authority to grant awards under the Plan
to eligible persons who are either (1) not then "covered employees," within the
meaning of Section 162(m) of the Code and are not expected to be "covered
employees" at the time of recognition of income resulting from such award or (2)
not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code and/or (ii) delegate to a committee of one or more members of
the Board who are not "non-employee directors," within the meaning of Rule
16b-3, the authority to grant awards under the Plan to eligible persons who are
not then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may only be filled by the Board.

                                       5

<PAGE>

         (b)  Powers of the Administrator. Subject to the provisions of the Plan
              ---------------------------
and the specific duties delegated by the Board to such Committee, and subject to
the approval of any relevant authorities, the Administrator shall have the
authority in its sole discretion:

              (i)    to determine the Fair Market Value;

              (ii)   to select the Service Providers to whom Options may from
time to time be granted hereunder;

              (iii)  to determine the number of Shares to be covered by each
such award granted hereunder;

              (iv)   to approve forms of agreement for use under the Plan;

              (v)    to determine the terms and conditions of any Option granted
hereunder (such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options may vest or be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or the Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine);

              (vi)   to determine whether to offer to buyout a previously
granted Option as provided in subsection 10(i) and to determine the terms and
conditions of such offer and buyout (including whether payment is to be made in
cash or Shares);

              (vii)  to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

              (viii) to allow Holders to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
minimum amount required to be withheld based on the statutory withholding rates
for federal and state tax purposes that apply to supplemental taxable income.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined. All elections by
Holders to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;

              (ix)   to amend the Plan or any Option granted under the Plan as
provided in Section 15; and

              (x)    to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan and to exercise such powers and perform such acts
as the Administrator deems necessary or desirable to promote the best interests
of the Company which are not in conflict with the provisions of the Plan.

                                       6

<PAGE>

         (c)  Effect of Administrator's Decision. All decisions, determinations
              ----------------------------------
and interpretations of the Administrator shall be final and binding on all
Holders.

         5.  Eligibility. Non-Qualified Stock Options may be granted to Service
             -----------
Providers. Incentive Stock Options may be granted only to Employees. If
otherwise eligible, a Service Provider who has been granted an Option may be
granted additional Options.

         6.  Limitations.
             -----------

             (a)  Each Option shall be designated by the Administrator in the
Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares subject to a Holder's Incentive Stock
Options and other incentive stock options granted by the Company, any Parent or
Subsidiary, which become exercisable for the first time during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options or other options shall be treated as Non-Qualified Stock
Options.

             For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.

             (b)  Neither the Plan nor any Option shall confer upon a Holder any
right with respect to continuing the Holder's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Holder's right or the Company's right to terminate such employment or consulting
relationship at any time, with or without cause.

             (c)  No Service Provider shall be granted, in any calendar year,
Options to purchase more than 1,666,666 Shares; provided, however, that the
                                                --------
foregoing limitation shall not apply prior to the Public Trading Date and,
following the Public Trading Date, the foregoing limitation shall not apply
until the earliest of: (i) the first material modification of the Plan; (ii) the
issuance of all of the shares of Common Stock reserved for issuance under the
Plan; (iii) the expiration of the Plan; (iv) the first meeting of stockholders
at which Directors of the Company are to be elected which occurs after the close
of the third calendar year following the calendar year in which occurred the
first registration of an equity security of the Company under Section 12 of the
Exchange Act; or (v) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder. The foregoing limitation shall
be adjusted proportionately in connection with any change in the Company's
capitalization as described in Section 13. For purposes of this Section 6(c), if
an Option is canceled in the same calendar year it was granted (other than in
connection with a transaction described in Section 13), the canceled Option will
be counted against the limit set forth in this Section 6(c). For this purpose,
if the exercise price of an Option is reduced, the transaction shall be treated
as a cancellation of the Option and the grant of a new Option.

         7.  Term of Plan. The Plan shall become effective upon its initial
             ------------
adoption by the Board and shall continue in effect until it is terminated under
Section 15 of the Plan. No Options may be issued under the Plan after May 16,
2008.

                                       7

<PAGE>

         8.  Term of Option. The term of each Option shall be stated in the
             --------------
Option Agreement; provided, however, that the term shall be no more than ten
                  --------
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to a Holder who, at the time the Option is granted, owns (or is
treated as owning under Code Section 424) stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Option shall be five (5) years from the
date of grant or such shorter term as may be provided in the Option Agreement.

         9.  Option Exercise Price and Consideration.
             ---------------------------------------

             (a)  The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:

                  (i)   In the case of an Incentive Stock Option

                        (A)  granted to an Employee who, at the time of grant of
such Option, owns (or is treated as owning under Code Section 424) stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than one hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant.

                        (B)  granted to any other Employee, the per Share
exercise price shall be no less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.

                  (ii)  In the case of a Non-Qualified Stock Option

                        (A)  granted to a Service Provider who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than one hundred ten percent (110%) of the
Fair Market Value per Share on the date of the grant.

                        (B)   granted to any other Service Provider, the per
Share exercise price shall be no less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant.

                  (iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.

             (b)  The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) with the consent of the Administrator, a full recourse promissory
note bearing interest (at no less than a market rate of interest) and payable
upon such terms as may be prescribed by the Administrator, (4) with the consent
of the

                                       8

<PAGE>

Administrator, other Shares which (x) in the case of Shares acquired from the
Company, have been owned by the Holder for more than six (6) months on the date
of surrender, and (y) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which such Option shall be
exercised, (5) with the consent of the Administrator, surrendered Shares then
issuable upon exercise of the Option having a Fair Market Value on the date of
exercise equal to the aggregate exercise price of the Option or exercised
portion thereof, (6) property of any kind which constitutes good and valuable
consideration, (7) with the consent of the Administrator, delivery of a notice
that the Holder has placed a market sell order with a broker with respect to
Shares then issuable upon exercise of the Options and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price, provided, that payment of
                                                      --------
such proceeds is then made to the Company upon settlement of such sale,
or (8) with the consent of the Administrator, any combination of the foregoing
methods of payment.

         10.  Exercise of Option.
              ------------------

              (a)  Vesting; Fractional Exercises. Options granted hereunder
                   -----------------------------
shall be vested and exercisable according to the terms hereof at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement; provided, however, that, except with regard to Options granted
                  --------
to Officers, Directors or Consultants, in no event shall an Option granted
hereunder become vested and exercisable at a rate of less than twenty percent
(20%) per year over five (5) years from the date the Option is granted, subject
to reasonable conditions, such as continuing to be a Service Provider. An Option
may not be exercised for a fraction of a Share.

              (b)  Deliveries upon Exercise. All or a portion of an exercisable
                   ------------------------
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his or her office:

                   (i)   A written or electronic notice complying with the
applicable rules established by the Administrator stating that the Option, or a
portion thereof, is exercised. The notice shall be signed by the Holder or other
person then entitled to exercise the Option or such portion of the Option;

                   (ii)  Such representations and documents as the
Administrator, in its sole discretion, deems necessary or advisable to effect
compliance with Applicable Laws. The Administrator may, in its sole discretion,
also take whatever additional actions it deems appropriate to effect such
compliance, including, without limitation, placing legends on share certificates
and issuing stop transfer notices to agents and registrars;

                   (iii) Upon the exercise of all or a portion of an unvested
Option pursuant to Section 10(h), a Restricted Stock purchase agreement in a
form determined by the Administrator and signed by the Holder or other person
then entitled to exercise the Option or such portion of the Option; and

                                       9

<PAGE>

                   (iv)  In the event that the Option shall be exercised
pursuant to Section 10(f) by any person or persons other than the Holder,
appropriate proof of the right of such person or persons to exercise the Option.

              (c)  Conditions to Delivery of Share Certificates. The Company
                   --------------------------------------------
shall not be required to issue or deliver any certificate or certificates for
Shares purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

                   (i)   The admission of such Shares to listing on all stock
exchanges on which such class of stock is then listed;

                   (ii)  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 sole
discretion, deem necessary or advisable;

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

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

                   (v)   The receipt by the Company of full payment for such
Shares, including payment of any applicable withholding tax, which in the sole
discretion of the Administrator may be in the form of consideration used by the
Holder to pay for such Shares under Section 9(b).

              (d)  Termination of Relationship as a Service Provider. If a
                   -------------------------------------------------
Holder ceases to be a Service Provider other than by reason of the Holder's
disability or death, such Holder may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination; provided, however, that prior to
                                             --------
the Public Trading Date, such period of time shall not be less than thirty (30)
days (but in no event later than the expiration of the term of the Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months following
the Holder's termination. If, on the date of termination, the Holder is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately cease to be issuable under the Option
and shall again become available for issuance under the Plan. If, after
termination, the Holder does not exercise his or her Option within the time
period specified herein, the Option shall terminate, and the Shares covered by
such Option shall again become available for issuance under the Plan.

              (e)  Disability of Holder. If a Holder ceases to be a Service
                   --------------------
Provider as a result of the Holder's disability, the Holder may exercise his or
her Option within such period of time as is specified in the Option Agreement to
the extent the Option is vested on the date of

                                       10

<PAGE>

termination; provided, however, that prior to the Public Trading Date, such
             --------  -------
period of time shall not be less than six (6) months (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for twelve (12) months following the Holder's termination. If
such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Non-Qualified Stock Option
from and after the day which is three (3) months and one (1) day following such
termination. If, on the date of termination, the Holder is not vested as to his
or her entire Option, the Shares covered by the unvested portion of the Option
shall immediately cease to be issuable under the Option and shall again become
available for issuance under the Plan. If, after termination, the Holder does
not exercise his or her Option within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall again become
available for issuance under the Plan.

         (f) Death of Holder. If a Holder dies while a Service Provider, the
             ---------------
Option may be exercised within such period of time as is specified in the Option
Agreement by the Holder's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date of death; provided, however, that prior to the
                                       --------
Public Trading Date, such period of time shall not be less than six (6) months
(but in no event later than the expiration of the term of such Option as set
forth in the Notice of Grant). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Holder's termination. If, at the time of death, the Holder is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option shall immediately cease to be issuable under the Option and shall again
become available for issuance under the Plan. The Option may be exercised by the
executor or administrator of the Holder's estate or, if none, by the person(s)
entitled to exercise the Option under the Holder's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
again become available for issuance under the Plan.

         (g) Regulatory Extension. A Holder's Option Agreement may provide that
             --------------------
if the exercise of the Option following the termination of the Holder's status
as a Service Provider (other than upon the Holder's death or Disability) would
be prohibited at any time solely because the issuance of shares would violate
the registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in Section 8 or (ii) the expiration of a period of three (3) months after
the termination of the Holder's status as a Service Provider during which the
exercise of the Option would not be in violation of such registration
requirements.

         (h) Early Exercisability. The Administrator may provide in the terms of
             --------------------
a Holder's Option Agreement that the Holder may, at any time before the Holder's
status as a Service Provider terminates, exercise the Option in whole or in part
prior to the full vesting of the Option; provided, however, that subject to
                                         --------
Section 20 hereof, Shares acquired upon exercise of an Option which has not
fully vested may be subject to any forfeiture, transfer or other restrictions as
the Administrator may determine in its sole discretion.

                                       11

<PAGE>

         (i) Buyout Provisions. The Administrator may at any time offer to
             -----------------
buyout for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Holder at the time that such offer is made.

    11.  Non-Transferability of Options. Options may not be sold, pledged,
         ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Holder, only by the Holder.

    12.  Stock Purchase Rights. Stock Purchase Rights may not be issued under
         ---------------------
         the Plan.

    13.  Adjustments upon Changes in Capitalization, Merger or Asset Sale.
         ----------------------------------------------------------------

         (a)   In the event that the Administrator determines that any dividend
or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Administrator's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended by the Company to be
made available under the Plan or with respect to any Option or Restricted Stock,
then the Administrator shall, in such manner as it may deem equitable, adjust
any or all of:

               (i)   the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options may be granted or awarded
(including, but not limited to, adjustments of the limitations in Section 3 on
the maximum number and kind of shares which may be issued and adjustments of the
maximum number of Shares that may be purchased by any Holder in any calendar
year pursuant to Section 6(c));

               (ii)  the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options or Restricted Stock; and

               (iii) the grant or exercise price with respect to any Option.

         (b)   In the event of any transaction or event described in Section
13(a), the Administrator, in its sole discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Option or
Restricted Stock or by action taken prior to the occurrence of such transaction
or event and either automatically or upon the Holder's request, is hereby
authorized to take any one or more of the following actions whenever the
Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended by the
Company to be made available under the Plan or

                                       12

<PAGE>

with respect to any Option or Restricted Stock granted or issued under the Plan
or to facilitate such transaction or event:

               (i)   To provide for either the purchase of any such Option or
Restricted Stock for an amount of cash equal to the amount that could have been
obtained upon the exercise of such Option or realization of the Holder's rights
had such Option or Restricted Stock been currently exercisable or payable or
fully vested or the replacement of such Option or Restricted Stock with other
rights or property selected by the Administrator in its sole discretion;

               (ii)  To provide that such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in the Plan or
the provisions of such Option;

               (iii) To provide that such Option or Restricted Stock be assumed
by the successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the stock
of the successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;

               (iv)  To make adjustments in the number and type of shares of
Common Stock (or other securities or property) subject to outstanding Options
and/or in the terms and conditions of (including the grant or exercise price),
and the criteria included in, outstanding Options or Restricted Stock, or
Options or Restricted Stock which may be granted in the future; and

               (v)   To provide that immediately upon the consummation of such
event, such Option shall not be exercisable and shall terminate; provided,
                                                                 --------
however, that for a specified period of time prior to such event, such Option
-------
shall be exercisable as to all Shares covered thereby, and the restrictions
imposed under an Option Agreement or Restricted Stock purchase agreement upon
some or all Shares may be terminated and, in the case of Restricted Stock, some
or all shares of such Restricted Stock may cease to be subject to repurchase,
notwithstanding anything to the contrary in the Plan or the provisions of such
Option or Restricted Stock purchase agreement.

         (c) Subject to Section 3, the Administrator may, in its sole
discretion, include such further provisions and limitations in any Option,
Restricted Stock agreement or certificate, as it may deem equitable and in the
best interests of the Company.

         (d) If the Company undergoes an Acquisition, then any surviving
corporation or entity or acquiring corporation or entity, or affiliate of such
corporation or entity, may assume any Options or Restricted Stock outstanding
under the Plan or may substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 13(d)) for those outstanding under the Plan. In the
event any surviving corporation or entity or acquiring corporation or entity in
an Acquisition, or affiliate of such corporation or entity, does not assume such
Options or Restricted Stock or does not substitute similar stock awards for
those outstanding under the Plan, then with respect to

                                       13

<PAGE>

(i) Options or Restricted Stock held by participants in the Plan whose status as
a Service Provider has not terminated prior to such event, the vesting of such
Options or Restricted Stock (and, if applicable, the time during which such
awards may be exercised) shall be accelerated and made fully exercisable and all
restrictions thereon shall lapse at least ten (10) days prior to the closing of
the Acquisition (and the Options terminated if not exercised prior to the
closing of such Acquisition), and (ii) any other Options outstanding under the
Plan, such Options shall be terminated if not exercised prior to the closing of
the Acquisition.

         (e) If the Company undergoes an Acquisition and if within eighteen (18)
months after the closing date of such Acquisition a Holder ceases to be a
Service Provider (to the Company or its successor) by reason of involuntary
termination (not including the Service Provider's disability or death) without
Cause, then the vesting of all Options or Restricted Stock
held by said Holder (and, if applicable, the time during which such awards may
be exercised) shall be accelerated and made fully exercisable and all
restrictions thereon shall lapse, as set forth hereinafter. One hundred percent
(100%) of the unvested Shares covered by such Options shall vest and become
fully exercisable (or reacquisition or repurchase rights held by the Company or
its successor shall lapse with respect to all of the Shares still subject to
such rights, as appropriate) as of the date of such termination.

         (f) Notwithstanding the foregoing paragraphs, in the event that the
Company becomes a party to a transaction that is intended to qualify for
"pooling of interests" accounting treatment and, but for one or more of the
provisions of this Plan or any Option Agreement or any Restricted Stock purchase
agreement would so qualify, then this Plan and any such agreement shall be
interpreted so as to preserve such accounting treatment, and to the extent that
any provision of the Plan or any such agreement would disqualify the transaction
from pooling of interests accounting treatment (including, if applicable, an
entire Option Agreement or Restricted Stock purchase agreement), then such
provision shall be null and void. All determinations to be made in connection
with the preceding sentence shall be made by the independent accounting firm
whose opinion with respect to "pooling of interests" treatment is required as a
condition to the Company's consummation of such transaction.

         (g) The existence of the Plan, any Option Agreement or Restricted Stock
purchase agreement and the Options granted hereunder shall not affect or
restrict in any way the right or power of the Company or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Common Stock or the rights
thereof or which are convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

     14. Time of Granting Options. The date of grant of an Option shall, for all
         ------------------------
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to

                                       14

<PAGE>

each Service Provider to whom an Option is so granted within a reasonable time
after the date of such grant.

     15. Amendment and Termination of the Plan.
         -------------------------------------

         (a) Amendment and Termination. The Board may at any time wholly or
             -------------------------
partially amend, alter, suspend or terminate the Plan. However, without approval
of the Company's stockholders given within twelve (12) months before or after
the action by the Board, no action of the Board may, except as provided in
Section 13, increase the limits imposed in Section 3 on the maximum number of
Shares which may be issued under the Plan or extend the term of the Plan under
Section 7.

         (b) Stockholder Approval. The Board shall obtain stockholder approval
             --------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

         (c) Effect of Amendment or Termination. No amendment, alteration,
             ----------------------------------
suspension or termination of the Plan shall impair the rights of any Holder,
unless mutually agreed otherwise between the Holder and the Administrator, which
agreement must be in writing and signed by the Holder and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options or Restricted Stock
granted or awarded under the Plan prior to the date of such termination.

     16. Stockholder Approval. The Plan will be submitted for the approval of
         --------------------
the Company's stockholders within twelve (12) months after the date of the
Board's initial adoption of the Plan. Options or Restricted Stock may be granted
or awarded prior to such stockholder approval, provided that such Options and
Restricted Stock shall not be exercisable, shall not vest and the restrictions
thereon shall not lapse prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Options and Restricted Stock
previously granted or awarded under the Plan shall thereupon be canceled and
become null and void.

     17. Inability to Obtain Authority. The inability of the Company to obtain
         -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

     18. Reservation of Shares. The Company, during the term of this Plan, shall
         ---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     19. Information to Holders and Purchasers. Prior to the Public Trading Date
         -------------------------------------
and to the extent required by Section 260.140.46 of Title 10 of the California
Code of Regulations, the Company shall provide to each Holder and to each
individual who acquires Shares pursuant to the Plan, not less frequently than
annually during the period such Holder or purchaser has one or more Options
outstanding, and, in the case of an individual who acquires Shares pursuant to
the Plan,

                                       15

<PAGE>

during the period such individual owns such Shares, copies of annual financial
statements. Notwithstanding the preceding sentence, the Company shall not be
required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information.

     20. Repurchase Provisions. The Administrator in its sole discretion may
         ---------------------
provide that the Company may repurchase Shares acquired upon exercise of an
Option upon the occurrence of certain specified events, including, without
limitation, a Holder's termination as a Service Provider, divorce, bankruptcy or
insolvency; provided, however, that any such repurchase right shall be set forth
            --------
in the applicable Option Agreement or Restricted Stock purchase agreement or in
another agreement referred to in such agreement and, provided, further, that to
                                                     --------
the extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of
the California Code of Regulations, any such repurchase right set forth in an
Option granted prior to the Public Trading Date to a person who is not an
Officer, Director or Consultant shall be upon the following terms: (i) if the
repurchase option gives the Company the right to repurchase the shares upon
termination as a Service Provider at not less than the Fair Market Value of the
shares to be purchased on the date of termination of status as a Service
Provider, then (A) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of status as a Service Provider (or in the case of shares
issued upon exercise of Options after such date of termination, within ninety
(90) days after the date of the exercise) or such longer period as may be agreed
to by the Administrator and the Plan participant and (B) the right terminates
when the shares become publicly traded; and (ii) if the repurchase option gives
the Company the right to repurchase the Shares upon termination as a Service
Provider at the original purchase price for such Shares, then (A) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares per year over five (5) years from the date
the Option is granted (without respect to the date the Option was exercised or
became exercisable) and (B) the right to repurchase shall be exercised for cash
or cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of status as a Service Provider (or, in the case of shares
issued upon exercise of Options, after such date of termination, within ninety
(90) days after the date of the exercise) or such longer period as may be agreed
to by the Company and the Plan participant.

     21. Investment Intent. The Company may require a Plan participant, as a
         -----------------
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the participant's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the participant is acquiring the stock subject to
the Option for the participant's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (A)
the issuance of the shares upon the exercise or acquisition of stock under the
applicable Option has been registered under a then currently effective
registration statement under the Securities Act or (B) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities

                                       16

<PAGE>

laws. The Company may, upon advice of counsel to the Company, place legends on
stock certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

     22. Governing Law. The validity and enforceability of this Plan shall be
         -------------
governed by and construed in accordance with the laws of the State of Delaware
without regard to otherwise governing principles of conflicts of law.

                                  * * * * * * *

     I hereby certify that the Second Amended and Restated Stock Option Plan was
duly adopted by the Board of Directors of R2 Technology, Inc., on February 1,
2002.

     Executed at Los Altos, California, on this ____ day of February, 2002.
                 ---------

                                   /s/ Michael S. Klein
                                   -------------------------------------------
                                   Name: Michael S. Klein
                                   Title:  President and Chief Executive Officer

                                  * * * * * * *

     I hereby certify that the foregoing Plan was approved by the stockholders
of R2 Technology, Inc., on February __, 2002.

     Executed at Menlo Park, California on this ____ day of February, 2002.
                 ----------

                                   /s/ Alan C. Mendelson
                                   -------------------------------------------
                                   Name: Alan C. Mendelson
                                   Title:  Secretary

                                       17

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