Document:

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                                                                    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.

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     (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

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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.

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              (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

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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.

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                  (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

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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

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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

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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

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     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

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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<PAGE>

                                                                    Exhibit 10.4

                           EXCLUSIVE LICENSE AGREEMENT

                               R2 TECHNOLOGY, INC.

         Exclusive License Agreement dated October 1, 1993, between SHIH-PING
BOB WANG ("WANG"), and R2 TECHNOLOGY, INC., a California corporation
("Licensee").

                              PRELIMINARY STATEMENT

         WANG holds rights to the Licensed Patent Rights described below.

         Licensee wishes to obtain the right to exploit the Licensed Patent
Rights in commercial settings.

         Therefore, in consideration of the mutual obligations set forth herein
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, WANG and Licensee agree as follows.

                                   ARTICLE 1.

                                   DEFINITIONS

         The following capitalized terms are used in this Agreement with the
following meanings:

         "Affiliate" means, as to any person or entity, any other person or
          ---------
entity which directly or indirectly, controls, is controlled by, or is under
common control with such person or, entity. For purposes of the preceding
definition, "control" means the right to control, or actual control of, the
management of such other entity, whether by ownership of voting securities, by
agreement, or otherwise.

         "First Financing" means the accomplishment of an investment by
          ---------------
investors of at least $250,000 in the Licensee. "Additional Financing" means the
                                                 --------------------
accomplishment of an investment by investors of at least $1,000,000 subsequent
to the First Financing.

         "Licensed Field" means computer aided diagnosis of diseases or
          --------------
disorders in humans.

         "Licensed Patent Rights" means (a) the patents and patent applications
          ----------------------
listed on Schedule I attached hereto, and (b) all patents and patent
applications which are divisions, continuations, continuations-in-part,
reissues, renewals, re-examinations, counterparts, substitutions, or extensions
of or to any patent applications or patents described in clause (a) of this
sentence.

--------------------------------------
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as * * *. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.

<PAGE>

          "Licensed Products" means any product within the scope of any Valid
           -----------------
Claim within the Licensed Patent Rights, and any product made by any art, method
or process within the scope of any Valid Claim within the Licensed Patent
Rights. "Valid Claim" means an issued claim of any unexpired patent, or a claim
         -----------
of any pending patent application, which has not been held unenforceable,
unpatentable or invalid by a decision of a court or governmental body of
competent jurisdiction, unappealable or unappealed within the time allowed for
appeal, which has not been rendered unenforceable through disclaimer or
otherwise, and which has not been lost through an interference proceeding.
Notwithstanding the foregoing to the contrary, a claim of a pending patent
application shall cease to be a valid claim if no patent has issued on such
claim on or prior to the fifth (5th) anniversary of the date of filing such
patent application (or in the case of a divisional or continuation application,
the date of the filing of the earliest parent application); provided that such
claim shall once again become a Valid Claim on the issue date of a patent that
subsequently issues and covers such claim.

          "Net Sales" means the gross sales price actually charged by Licensee
           ---------
in the sale of a System, in the Territory, less:

               (i)   customary trade, quantity or cash discounts, rebates,
          non-affiliated brokers' or agents' commissions actually allowed and
          taken;

               (ii)  amounts repaid or credited to customers on account of
          rejections or returns of specified products subject to royalty
          hereunder or on account of retroactive price reductions affecting such
          products; and

               (iii) freight and other transportation costs, including insurance
          charges, and duties, tariffs, sales and excise taxes and other
          governmental charges based directly on sales, turnover or delivery of
          the specified products and actually paid or allowed by Licensee or a
          sublicensee.

          "Patent Costs" means a person's out-of-pocket expenses incurred in
           ------------
connection with the preparation, filing, prosecution and maintenance of the
patents under the Licensed Patent Rights, in the Territory, U.S. and foreign
countries, including, among other items, the fees and expenses of attorneys and
patent agents' filing fees and maintenance fees, but excluding costs involved in
any patent infringement claims.

          "Royalties" means all amounts payable under Section 3.1 of this
           ---------
Agreement.

                                       -2-

<PAGE>

          "Sublicense" means any grant by Licensee of any rights to a
           ----------
sublicensee, under the terms of Section 2.1 of this Agreement.

          "System" means any saleable unit containing or consisting of any
           ------
Licensed Product.

          "Technical Information" means the technical information and know-how,
           ---------------------
if any, in WANG's possession relating to the Licensed Patent Rights.

          "Territory" means anywhere in the world.
           ---------

          "University" means The University of Chicago.
           ----------

                                   ARTICLE 2.

                                GRANT OF LICENSE

          2.1  Grant. WANG hereby grants to Licensee:
               -----

               (a) an exclusive license to make, have made, use and sell
          Licensed Products under the Licensed Patent Rights in the Licensed
          Field in the Territory; and

               (b) the exclusive right and authority to grant Sublicenses of the
          rights granted in Section 2.1(a) above, subject, to the provisions of
          this Agreement.

          2.2  Sublicenses. Prior to entering into any' Sublicense, Licensee
               -----------
shall obtain the approval of WANG to the terms of the Sublicense,, which
approval shall not be unreasonably withheld in each instance, provided the terms
of any such Sublicense are consistent with the terms of this Agreement. Upon the
termination of this Agreement for any reason, each Sublicense shall terminate
without the necessity of any notice or other communication from WANG to the
sublicensee. WANG agrees to negotiate in good faith for a period of ninety (90)
days following the termination of this Agreement with each sublicensee under any
Sublicense which is by its own terms in force and good standing upon the
termination of this Agreement for any reason, for a license from WANG of those
rights subject to the Sublicense, on terms substantially comparable to those set
forth in the Sublicense and this Agreement, provided that nothing herein shall
be deemed to extend any Sublicense beyond its original term unless specifically
agreed to in writing by WANG.

          2.3  Additional Financing. If Licensee fails to accomplish an
               --------------------
Additional Financing prior to June 30, 1994, then:

               (a) WANG shall have the right (notwithstanding Section 2.4 above)
          to grant to third parties non-exclusive

                                       -3-

<PAGE>

          licenses under the Licensed Patent Rights, at any time after June 30,
          1994; and

               (b) Licensee shall longer have the right (notwithstanding
          Section 2.1(b) above) to grant Sublicenses.

                                   ARTICLE 3.

                                    PAYMENTS

          3.1  Royalties. For the license granted in Section 2.1 of this
               ---------
Agreement, Licensee shall pay WANG:

               (a) immediately upon the First Financing, an upfront Royalty in
          the amount of $15,000;

               (b) at all times after the date hereof, (i) a running Royalty
          equal to one percent (1%) of Net Sales in each jurisdiction in which a
          patent under the Licensed Patent Rights exists and (ii) a running
          Royalty equal to one percent (1%) of Net Sales in each jurisdiction in
          which a patent application under the Licensed Patent: Rights exists
          shall accrue and payable when a patent shall be issued on such patent
          application.

               (c) a running royalty equal to the greater of: (i) fifty percent
          (50%) of all payments received by Licensee or any of its Affiliates
          with respect: to any Sublicenses from any sublicensee, regardless of
          whether such payments are denominated as fees, royalties or otherwise;
          or (ii) 1% of Net Sales of Licensed Products sold by any sublicensee
          in each jurisdiction in which a patent under the Licensed Patent
          Rights exists or in which a patent application under the Licensed
          Patent Rights is pending.

               (d) immediately upon the signing of this Agreement, as an upfront
          Royalty, Licensee shall release from its escrow 100,000 shares of
          WANG's Common Stock.

All Royalties paid to WANG pursuant to this Agreement shall be non-refundable
under any and all circumstances.

          3.2  Minimum Royalties.
               -----------------

               (a) Licensee shall pay to WANG the greater of (i) the actual
Royalties for a particular calendar quarter determined pursuant to Sections
3.1(a) and 3.1(b) above, and (ii) the minimum royalties ("Minimum Royalties")
for such calendar quarter as set forth below:

                                       -4-

<PAGE>

                     Calendar                                          Minimum
                 Quarters Ending                                      Royalties
-----------------------------------------------------                -----------
September 30, 1995 through March 31, 1997                              $ 6,250
June 30, 1997 and thereafter                                            12,500

                (b) If Licensee fails to pay to WANG the appropriate minimum
Royalties with respect to any calendar quarter then WANG shall have the right
(notwithstanding section 2.4 above) to grant to third parties non-exclusive
licenses under the Licensed Patent Rights, at any time after the date that the
Royalties and any minimum Royalty are payable with respect to that quarter,
provided that WANG shall have, given Licensee thirty (30) days' written notice
of payment default and Licensee shall have failed to cure such payment default
within said thirty(30) day period.

                (c) The Minimum Royalties paid in excess of the Royalties
defined in Section 3.1(b) shall be applied as a credit toward future Royalties,
provided such credit: (i) shall be applicable only to the four quarterly Royalty
payments following payment of such credit; and (ii) shall not exceed fifty
percent (50%)of the Minimum Royalties otherwise due in any quarter.

        3.3  Calculation of Royalties.
             ------------------------

                (a) Royalties shall be calculated on a calendar quarter basis.
Payment of Royalties (or Minimum Royalties) with respect to each calendar
quarter shall be due within sixty (60) days after the end of each quarter,
beginning with the earlier of the calendar quarter in which the first commercial
sale of Licensed Products occurs or the calendar quarter ended December 31,
1994.

                (b) At the same time that it makes payment of Royalties (or
Minimum Royalties)due with respect to a calendar quarter, Licensee shall deliver
to WANG a true and complete accounting of sales of Licensed Products and
receipts from those sales by Licensee and its sublicensees during the quarter,
with a separate accounting of sales and receipts by country and a calculation of
the Royalty payment due WANG for such calendar quarter. If no sales of Licensed
Products orSublicense payments were made in such quarter then Licensee's
statement shall be a statement to such effect.

                (c) Licensee hereby covenants and agrees that it shall
immediately notify WANG of the occurrence of any event giving rise to Licensee's
obligations to make payments pursuant to section 3.1(a) above.

                                       -5-

<PAGE>

         3.4 Records. Licensee shall keep, and shall cause its sublicensees to
             -------
keep, accurate records in sufficient detail to permit the Royalties payable
under this Agreement to be determined. During the term of this Agreement and for
a period of three years following termination of this Agreement, Licensee shall
permit(and shall cause its sublicensees to permit) its books and records
regarding its Patent Costs and the sale of Licensed Products to be examined and
copied from time to time, and shall require each of its sublicensees to do the
same, at the request of WANG, during normal business hours by WANG or any
representative of WANG. Such examination shall be made at WANG's expense, except
that if such examination discloses a discrepancy of 5% or more in the amount
of Royalties or any other sums due WANG, then Licensee shall reimburse WANG for
the cost of such examination,. including any professional fees incurred by WANG.
In connection with any examination or copying of books or records in accordance
with the preceding sentence, WANG or such representative of WANG shall examine
only such information as is required to verify the Licensee's compliance under
this Agreement.

         3.5 Foreign Payments. In the event of transactions giving rise to an
             ----------------
obligation to make a payment hereunder with respect to which Licensee or any
sublicensee receives payment in a currency other than currency which is legal
tender in the United States of America, all payments required to be made by
Licensee under Section 3.1 hereof shall be converted, prior to payment, into
United States dollars at the applicable rate of exchange of Citibank, N.A., in
New, York, New York, on the last day of the quarter in which such transaction
occurred.

         3.6 Overdue Payments. Payments due to WANG under this Agreement shall,
             ----------------
if not paid when due under the terms of this Agreement, bear simple interest at
the lower of 15% or the highest rate permitted by law, calculated on the basis
of the number of. days actually elapsed in a 360 day year, beginning on the due
date and ending on the day prior to the day on which payment is made in full.
Interest accruing under this section shall be due to WANG on demand. The accrual
or receipt by WANG of interest under this Section shall not constitute a waiver
by WANG of any right it may otherwise have to declare a breach of or default
under this Agreement or to terminate this Agreement.

         3.7 Termination Report and Payment. Within sixty (60) days after the
             ------------------------------
date of termination of this Agreement, Licensee shall make a written report to
WANG which report shall state the number, description, and amount of Licensed
Products sold by Licensee or any sublicensee upon which Royalties are payable
hereunder but which were not previously reported to WANG, a calculation of the
Net Sales of such Licensed Products, and a calculation of the Royalty payment
due WANG for such Licensed Products. Concurrent

                                       -6-

<PAGE>

with the making of such report, Licensee shall make the Royalty payment due WANG
for such period.

         3.8 Progress Report. On the completion of an audited annual report
             ---------------
after each fiscal year or, if no such audit is undertaken, before January 30 of
each year during the term of this Agreement, Licensee shall make a written
annual report to WANG, in such detail as WANG may reasonably request, including
without limitation research and development and marketing updates, covering the
preceding year and describing the progress of Licensee toward commercialization
of Licensed Products.

         3.9 Commercialization. During the term of this Agreement, Licensee
             -----------------
shall use its best efforts to introduce Licensed Products into appropriate
commercial markets.

                                   ARTICLE 4.

                         NO WARRANTIES; INDEMNIFICATION

         4.1 Disclaimer of Warranties. WANG hereby warrants and represents to
             ------------------------
Licensee that he is the sole owner of all rights, title and interest in and to
the Licensed Patent Rights and that he has full authority to enter into this.
Agreement without the prior written consent of any third party.

     Except as set forth above, WANG HEREBY EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES OF ANY KIND OR NATURE, WHETHER EXPRESS OR IMPLIED RELATING TO THE
INVENTIONS, THE TECHNICAL INFORMATION, THE LICENSED PRODUCTS OR LICENSED PATENT
RIGHTS. WANG FURTHER HEREBY EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE
PRACTICE OF THE LICENSED PATENT RIGHTS OR THE MAKING, USING OR SELLING OF
LICENSED PRODUCTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER
RIGHTS OF THIRD PARTIES. Without limiting the generality of the foregoing, WANG
expressly does not warrant (i) the patentability of any of the Inventions, (ii)
the accuracy of any Technical Information or other information contained in the
Invention Disclosures listed on Schedule I attached hereto, or (iii) the
accuracy, safety, or usefulness for any purpose of the Technical Information,
Licensed Patent Rights, Inventions or Licensed Products. Nothing contained in
this Agreement shall be construed as either a warranty or representation by WANG
as to the validity or scope of any Licensed Patent Rights that may issue. WANG
assumes no liability in respect of any infringement of any patent or other right
of third parties due to the activities of Licensee or any of its Affiliates or
sublicensees under this Agreement.

                                       -7-

<PAGE>

         4.2 Indemnification.
             ---------------

           (a) Licensee agrees to list WANG, at Licensee's expense as an
additional insured under each liability insurance policy that Licensee and each
of its sublicensees obtains that includes any coverage of claims relating to any
of the Inventions, Licensed patent Rights or Licensed Products. At WANG's
request, Licensee will supply WANG from time to time with copies of each such
policy, and will notify WANG in writing of any termination of or change in
coverage under any such policies.

           (b) Licensee's obligations under this Section 4.2 shall survive the
expiration or earlier termination of all or any part of this Agreement.

                                   ARTICLE 5.

              PROSECUTION AND MAINTENANCE OF LICENSED PATENT RIGHTS

         5.1 Prosecution and Maintenance. During the term of this Agreement,
             ---------------------------
Licensee shall be responsible for the Patent Costs and for prosecuting and
maintaining patents under the Licensed Patent Rights in at least six major
countries in the world. Licensee shall reimburse WANG for Patent Costs incurred
up to the date of this Agreement.

         5.2 Cooperation. Licensee agrees to cooperate with WANG in the
             -----------
preparation, filing, prosecution and maintenance of the Licensed Patent Rights,
by disclosing such information as may be necessary and by promptly executing
such documents as WANG may reasonably request to effect such efforts. Licensee
shall bear its own costs in connection with its cooperation with WANG under this
Section. All patents under the Licensed Patent Rights shall be filed, prosecuted
and maintained in WANG's name or as WANG shall designate.

         5.3 Confidentiality.
             ---------------

           (a) Both Licensee and WANG agree to treat (and, in the case of
Licensee, to cause its Affiliates and sublicensed to treat) as confidential all
information with respect to the Technical Information or the Licensed Patent
Rights made available by WANG to Licensee or by Licensee to WANG. WANG
acknowledges that Licensee may find it beneficial to disclose such information
provided by WANG during the conduct of Licensee's business. Under such
circumstances, Licensee may make such information available to third parties,
provided that Licensee shall first obtain from the recipients a fully-executed
confidentiality agreement which is at least as restrictive as the
confidentiality agreement Licensee employs to protect its own most valuable
trade secrets.

                                       -8-

<PAGE>

           (b) Neither Licensee nor WANG shall be bound by the provisions of
Section 5.3 (a) with respect to information which (i) was previously known to
the recipient at the time of disclosure; (ii) is in the public domain at the
time of disclosure; (iii) becomes a part of the public domain after the time of
disclosure, other than through disclosure by the recipient or some other third
party who is under an agreement of confidentiality with respect to the subject
information; or (iv) is required to be disclosed by law.

           (c) Licensee and WANG shall each take such actions as the other party
may reasonably request from time to time to safeguard the confidentiality of any
information subject to the terms of this Section 5.3.

           (d) To the extent that United State Export Control Regulations are
applicable, neither Licensee nor WANG shall, without having first fully complied
with such regulations, (i) knowingly transfer, directly or indirectly, any
unpublished technical data obtained or to be obtained from the other party
hereto to a destination outside the United States, or (ii) knowingly ship,-
directly or indirectly, any product produced using such unpublished technical
data, to any destination outside the United States.

           (e) The obligations of Licensee and WANG under this Section 5.3 shall
survive the expiration or earlier termination of all or any other part of this
Agreement.

                                   ARTICLE 6.

                                  INFRINGEMENT

           6.1 Notification. In the event that either WANG or Licensee becomes
               ------------
aware of the infringement of any patent under the Licensed Patent Rights within
the Licensed Field, each shall immediately inform the other in writing of all
details available.

           6.2 Right to Prosecute.
               ------------------

              (a) In the event of infringement by a third party of any patent
under the Licensed Patent Rights within the Licensed Field, WANG may elect, at
his own expense, to enforce such Licensed Patent Rights against the infringers
by appropriate legal proceedings or otherwise. Any and all recoveries by way of
royalties. damages or settlement shall go to WANG. Licensee will cooperate with
WANG and execute any documents necessary for WANG to exercise WANG's rights
under this clause.

              (b) In the event of infringement by a third party as described in
Section 6.2(a) above, if WANG shall fail to proceed

                                       -9-

<PAGE>

against any such infringer within ninety (90) days after receipt of a written
request by Licensee to do so or if WANG shall fail to exercise due diligence in
proceedings instituted pursuant to Section 6.2(a) above, then Licensee, in its
own discretion and at its own expense, may prosecute the infringer in the name
of WANG. Any and all recoveries by way of royalties, damages or settlement shall
be divided by Licensee and WANG as follows: 95% to Licensee and 5% to WANG.

                                   ARTICLE 7.

                                  TERMINATION

           7.1 WANG's Right to Terminate. WANG shall have the right (without
               -------------------------
prejudice to any of its other rights conferred on it by this Agreement) to
terminate this Agreement if Licensee (or, with respect to Section 7.1(d) below,
any of its Affiliates):

              (a) fails to maintain a non-exclusive license of patents and
patent applications from ARCH Development Corporation;

              (b) is in default in payment of Royalties or making of reports,
and Licensee fails to remedy any such default within thirty (30) days after
being given fifteen (15) days' written notice thereof by WANG;

              (c) is in breach of any other material provision of this
Agreement, and Licensee fails to remedy any such default within thirty (30) days
after written notice thereof by WANG; or

              (d) shall commence a voluntary case as a debtor. under the
Bankruptcy Code of the United States or any successor statute (the, "Bankruptcy
Code"), or if an involuntary case shall be commenced against Licensee under the
Bankruptcy Code and the petition in such case is not dismissed within 45 days of
the commencement of the case, or if an order for relief shall be entered in such
case, or if the same or any similar circumstance shall occur under the laws of
any foreign jurisdiction.

           7.2 Licensee Right to Terminate. Licensee may terminate this
               ---------------------------
Agreement at any time by written notice to WANG, given at least
ninety (90) days prior to the termination daze specified in the notice.

           7.3 Effect of Termination.
               ---------------------

              (a) In the event of the termination of this Agreement for any
reason, whether by Licensee or WANG, Licensee shall

                                       -10-

<PAGE>

immediately cease using the Technical Information and making and selling any
Licensed Products derived therefrom, and shall return to WANG, or deliver as
WANG directs, the Technical Information then in its possession.

              (b) Notwithstanding the termination of this Agreement, the
following provisions of this Agreement shall survive:

                  (i)      Licensee's obligation to pay Royalties, Exclusive
                           License Fee and Patent Costs accrued or accruable;

                  (ii)     Licensee's obligations under Articles 3 and 4,
                           Sections 5.1, 5.2, 5.3 and, to the extent proceedings
                           have been initiated, Section 6.2, and this Section
                           7.3(b) ; and

                  (iii)    any cause of action or claim of Licensee or WANG,
                           accrued or to accrue, because of any breach or
                           default-by the other party.

           7.4 Expiration of Patent Rights. This Agreement shall terminate upon
               ---------------------------
the expiration of the last to expire patents of the Licensed Patent Rights,
provided that WANG's and Licensee's obligations under Sections 4.2 and 5.3 shall
survive and continue in effect as provided in such Sections.

                                   ARTICLE 8.

                                 MISCELLANEOUS

           8.1 Assignment. This Agreement may, at any time and upon. sixty, (60)
               ----------
days prior notice to Licensee, be assigned by WANG without such assignment
operating to terminate, impair or in any way change the obligations or rights
which WANG would have had, or any of the obligations or rights which Licensee
would have had, if such assignment had not occurred. From and after the making
of such assignment, the assignee shall be substituted for WANG as a party
hereto, and WANG shall no longer be bound hereby. This Agreement may, at any
time and upon sixty (60) days prior notice to WANG, be assigned by Licensee to
any third party that acquires from Licensee substantially all of Licensee's
business to which this Agreement relates.

           8.2 Entire Agreement, Amendment and Waiver. This Agreement (including
               --------------------------------------
any schedules and exhibits attached) contains the entire understanding of the
parties with respect to the subject matter hereof. This Agreement may be
amended, modified or altered only by an instrument in writing duly executed by
the parties hereto. The

                                       -11-

<PAGE>

waiver of a breach hereunder may be effected only by a writing signed by the
waiving party and shall not constitute a waiver of any other breach.

          8.3  Notices. Any notice or report required or permitted to be given
               -------
or made under this Agreement by one of the parties hereto to the other shall be
in writing and shall be given by personal delivery or by United States
registered or certified mail, return receipt requested, addressed as follows:

          If to WANG:             Shih-Ping Bob Wang
                                  409 Becker Lane
                                  Los Altos, CA 94022

          If to Licensee:         R2 Technology, Inc.
                                  409 Becker Lane
                                  Los Altos, California 94022
                                  Attention: S.P. Bob Wang, Chairman

                                  with a copy to:

                                  Wilson, Sonsini, Goodrich & Rosati
                                  Two Palo Alto Square
                                  Palo Alto, California 94306
                                  Attention: J. Casey McGlynn, Esq.

or to such other address of which the intended recipient shall have notified the
sender by a written notice given in accordance with the terms of this Section.
Any notice under this Agreement shall be effective when received.

          8.4  Severability. In the event that any one or more of the provisions
               ------------
of this Agreement should for any reason be held by any court or authority having
jurisdiction over this Agreement, or either of the parties hereto, to be
invalid, illegal or unenforceable, such provision or provisions shall be
reformed to approximate as nearly as possible the intent of the parties, and the
validity of the remaining provisions shall not be affected.

          8.5  Governing Law. The interpretation and performance of this
               -------------
Agreement shall be governed by the laws of the State of Illinois in the United
States of America applicable to contracts made and to be performed in that
state.

          8.6  Marking. Licensee shall place in a conspicuous location on any
               -------
Licensed Product (or its packaging where appropriate) made or sold under this
Agreement, a patent notice in accordance with the laws concerning the marking of
patented articles.

                                       -12-

<PAGE>

          8.7  Implementation: Each party shall. at the request of the other
               --------------
party. execute any document reasonably necessary to implement the provision of
this Agreement.

          8.8  Counterparts. This Agreement may be executed in multiple
               ------------
counterparts. each of which when taken together shall constitute one and the
same instrument.

          IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be executed by their respective duly authorized officers or representatives on
the date first above written.

WANG:                                       SHIH-PING BOB WANG

                                            By: /s/ Shih-Ping Bob Wang
                                                --------------------------------

Licensee:                                   R2 TECHNOLOGY, INC.

                                            By: /s/ Robert Foley
                                                --------------------------------
                                            Its: Director and Vice President

                                       -13-

<PAGE>

                                   SCHEDULE I

                              INVENTION DISCLOSURES
                              ---------------------

     Patents issued and Patent Applications pending:

     (1)  Wang S.P.: * * *

--------------------------------------
* * *Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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