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                                                                   EXHIBIT 10.22

                               DIGIRAD CORPORATION

                      1998 STOCK OPTION/STOCK ISSUANCE PLAN
                    (AMENDED AND RESTATED AS OF MAY 15, 2001)

                                   ARTICLE ONE

                               GENERAL PROVISIONS

         I. PURPOSE OF THE PLAN

                   This 1998 Stock Option/Stock Issuance Plan is intended to
promote the interests of Digirad Corporation by providing eligible persons with
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.

                   Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.

         II. STRUCTURE OF THE PLAN

                   A. The Plan shall be divided into two separate equity
programs:

                             - the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock, and

                             - the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any Parent or
Subsidiary).

                   B. The provisions of Articles One and Four shall apply to
all equity programs under the Plan and shall govern the interests of all
persons under the Plan.

         III. ADMINISTRATION OF THE PLAN

                   A. Except as provided in Paragraph B of this Section III,
the Plan shall be administered by the Board or one or more committees
appointed by the Board, provided that (1) beginning with the Section 12
Registration Date, the Primary Committee shall have sole and exclusive
authority to administer the Plan with respect to Section 16 Insiders, and (2)
administration of the Plan may otherwise, at the Board's discretion, be
vested in the Primary Committee or a Secondary Committee.

                   B. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
may be removed by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers
and authority previously delegated to such committee.

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                   C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of
such programs and any outstanding options or stock issuances thereunder as it
may deem necessary or advisable. Decisions of the Plan Administrator within
the scope of its administrative functions under the Plan shall be final and
binding on all parties who have an interest in the Discretionary Option Grant
and Stock Issuance Programs under its jurisdiction or any option or stock
issuance thereunder.

                   D. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each
such committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member
of the Primary Committee or the Secondary Committee shall be liable for any
act or omission made in good faith with respect to the Plan or any option
grants or stock issuances under the Plan.

         IV. ELIGIBILITY

                   A. The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:

                                       (i) Employees,

                                       (ii) non-employee members of the Board or
         the board of directors of any Parent or Subsidiary, and

                                       (iii) consultants and other independent
         advisors who provide services to the Corporation (or any Parent or
         Subsidiary).

                   B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or
times when such option grants are to be made, the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times when each
option is to become exercisable, the vesting schedule (if any) applicable to
the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued
to each Participant, the vesting schedule (if any) applicable to the issued
shares and the consideration for such shares.

                   C. The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Discretionary
Option Grant Program or to effect stock issuances in accordance with the
Stock Issuance Program.


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         V. STOCK SUBJECT TO THE PLAN

                   A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock initially reserved for issuance over the term of the
Plan shall not exceed 5,420,659 shares. Such share reserve includes (i)
1,720,659 shares that were initially reserved for issuance by the Board on
December 17, 1998 and approved by the stockholders on February 1, 1999, plus
(ii) an additional 1,000,000 shares that were approved for issuance by the
Board on March 9, 2000 and by the stockholders on November 14, 2000, plus
(iii) an additional 1,200,000 shares that were approved for issuance by the
Board and stockholders on November 14, 2000, plus (iii) an additional
1,500,000 shares that were approved for issuance by the Board on May 15, 2001
and by the stockholders on June 25, 2001. Such 5,420,659 share reserve shall
be in addition to the 2,734,201 shares issued or reserved for issuance under
the Corporation's 1997 Stock Option/Stock Issuance Plan.

                   B. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent those
options expire or terminate for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan.

                   C. If any change is made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under this
Plan per calendar year, and (iii) the number and/or class of securities and
the exercise price per share in effect under each outstanding option under
the Plan. Such adjustments to the outstanding options are to be effected in a
manner which shall preclude the enlargement or dilution of rights and
benefits under such options. The adjustments deter-mined by the Plan
Administrator shall be final, binding and conclusive.

                                  ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM

         I. OPTION TERMS

                  Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.


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                   A. EXERCISE PRICE.

                             1. The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than eighty-five percent
(85%) of the Fair Market Value per share of Common Stock on the option grant
date, provided that the Plan Administrator may fix the exercise price at less
than 85% if the optionee, at the time of the option grant, shall have made a
payment to the Company (including payment made by means of a salary
reduction) equal to the excess of the Fair Market Value of the Common Stock
on the option grant date over such exercise price.

                             2. The exercise price shall become immediately
due upon exercise of the option and may, subject to the provisions of Section
I of Article Four and the documents evidencing the option, be payable in one
or more of the forms specified below:

                                       (i) cash or check made payable to the
         Corporation,

                                       (ii) with respect to the exercise of
         options after the Section 12 Registration Date, shares of Common Stock
         held for the requisite period necessary to avoid a charge to the
         Corporation's earnings for financial reporting purposes and valued at
         Fair Market Value on the Exercise Date, or

                                       (iii) with respect to the exercise of
         options for vested shares after the Section 12 Registration Date and
         to the extent the sale complies with all applicable laws relating to
         the regulation and sale of securities, through a special sale and
         remittance procedure pursuant to which the Optionee shall concurrently
         provide irrevocable written instructions to (a) a Corporation-
         designated brokerage firm to effect the immediate sale of the purchased
         shares and remit to the Corporation, out of the sale proceeds available
         on the settlement date, sufficient funds to cover the aggregate
         exercise price payable for the purchased shares plus all applicable
         Federal, state and local income and employment taxes required to be
         withheld by the Corporation by reason of such exercise, and (b) the
         Corporation to deliver the certificates for the purchased shares
         directly to such brokerage firm in order to complete the sale.

                   Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

                   B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.

                   C. EFFECT OF TERMINATION OF SERVICE.

                             1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:


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                                       (i) Any option outstanding at the time
         of the Optionee's cessation of Service for any reason shall remain
         exercisable for such period of time thereafter as shall be
         determined by the Plan Administrator and set forth in the documents
         evidencing the option (which shall in no event be less than six (6)
         months in the case of death or disability nor less than thirty (30)
         days in the case of any other cessation of Service), provided no
         such option shall be exercisable after the expiration of the option
         term.

                                       (ii) Any option exercisable in whole
         or in part by the Optionee at the time of death may be subsequently
         exercised by the personal representative of the Optionee's estate or
         by the person or persons to whom the option is transferred pursuant
         to the Optionee's will or in accordance with the laws of descent and
         distribution.

                                       (iii) Subject to clause C.2.(ii) below
         of this Section I, during the applicable post-Service exercise
         period, the option may not be exercised in the aggregate for more
         than the number of vested shares for which the option is exercisable
         on the date of the Optionee's cessation of Service. Upon the
         expiration of the applicable exercise period or (if earlier) upon
         the expiration of the option term, the option shall terminate and
         cease to be outstanding for any vested shares for which the option
         has not been exercised.

                             2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:

                                       (i) extend the period of time for
         which the option is to remain exercisable following the Optionee's
         cessation of Service from the limited exercise period otherwise in
         effect for that option to such greater period of time as the Plan
         Administrator shall deem appropriate, but in no event beyond the
         expiration of the option term, and/or

                                       (ii) permit the option to be
         exercised, during the applicable post-Service exercise period, not
         only with respect to the number of vested shares of Common Stock for
         which such option is exercisable at the time of the Optionee's
         cessation of Service but also with respect to one or more additional
         installments in which the Optionee would have vested had the
         Optionee continued in Service.

                   D. STOCKHOLDER RIGHTS.  The holder of an option shall have
no stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and become
a holder of record of the purchased shares.

                   E. REPURCHASE RIGHTS. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock and to reserve the right to repurchase any or all of those
unvested shares should the optionee thereafter cease to be in Service to the
Corporation. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.


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                   F. LIMITED TRANSFERABILITY OF OPTIONS.  During the
lifetime of the Optionee, options shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.

         II. INCENTIVE OPTIONS

                   The terms specified below shall be applicable to all
Incentive Options. Except as modified by the provisions of this Section II,
all the provisions of Articles One, Two and Four shall be applicable to
Incentive Options. Options which are specifically designated as Non-Statutory
Options when issued under the Plan shall not be subject to the terms of this
Section II.

                   A. ELIGIBILITY. Incentive Options may only be granted to
Employees.

                   B. EXERCISE PRICE. The exercise price per share shall not
be less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.

                   C. DOLLAR LIMITATION. The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.

                   D. 10% STOCKHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share
shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.

         III. CANCELLATION AND REGRANT OF OPTIONS

                   The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program and to grant in substitution new options covering the same
or different number of shares of Common Stock but with an exercise price per
share based on the Fair Market Value per share of Common Stock on the new grant
date.


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                                  ARTICLE THREE

                             STOCK ISSUANCE PROGRAM

         I. STOCK ISSUANCES

                   Shares of Common Stock may be issued under the Stock
Issuance Program through direct and immediate issuances without any
intervening option grants. Each such stock issuance shall be evidenced by a
Stock Issuance Agreement which complies with the terms specified below.

         II. STOCK ISSUANCE TERMS

                   A. PURCHASE PRICE.

                             1. The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than eighty-five percent
(85%) of the Fair Market Value per share of Common Stock on the issuance date.

                             2. Subject to the provisions of Section I of
Article Four, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

                                       (i) cash or check made payable to the
         Corporation, or

                                       (ii) past services rendered to the
         Corporation (or any Parent or Subsidiary).

                   B. VESTING PROVISIONS.

                             1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully
and immediately vested upon issuance or may vest in one or more installments
over the Participant's period of Service or upon attainment of specified
performance objectives. The elements of the vesting schedule applicable to
any unvested shares of Common Stock issued under the Stock Issuance Program,
namely:

                                       (i) the Service period to be completed
         by the Participant or the performance objectives to be attained,

                                       (ii) the number of installments in which
         the shares are to vest,

                                       (iii) the interval or intervals (if any)
         which are to lapse between installments, and

                                        (iv) the effect which death, Permanent
         Disability or other event designated by the Plan Administrator is to
         have upon the vesting schedule,


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shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

                             2. Any new, substituted or additional securities
or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
the Participant's unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.

                             3. The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest
in those shares is vested. Accordingly, the Participant shall have the right
to vote such shares and to receive any regular cash dividends paid on such
shares.

                             4. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued
under the Stock Issuance Program or should the performance objectives not be
attained with respect to one or more such unvested shares of Common Stock,
then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money indebtedness), the
Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.

                             5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock which would otherwise occur upon the cessation of the Participant's
Service or the non-attainment of the performance objectives applicable to
those shares. Such waiver shall result in the immediate vesting of the
Participant's interest in the shares as to which the waiver applies. Such
waiver may be effected at any time, whether before or after the Participant's
cessation of Service or the attainment or non-attainment of the applicable
performance objectives.

                                  ARTICLE FOUR

                                  MISCELLANEOUS

         I. FINANCING

                   The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing


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promissory note payable in one or more installments. The terms of any such
promissory note (including the interest rate and the terms of repayment)
shall be established by the Plan Administrator in its sole discretion. In no
event may the maximum credit available to the Optionee or Participant exceed
the sum of (i) the aggregate option exercise price or purchase price payable
for the purchased shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase.

         II. SHARE ESCROW/LEGENDS

                   Unvested shares issued under the Plan may, in the Plan
Administrator's discretion, be held in escrow by the Corporation until the
Participant's interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing those
unvested shares.

         III. CORPORATE TRANSACTION

                   A. Except as otherwise provided in the agreements
evidencing an option, each outstanding option under the Discretionary Option
Grant Program shall automatically accelerate in the event of a Corporate
Transaction so that each such option shall, immediately prior to the
effective date of the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock, provided that an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation (or parent thereof) or to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation
(or parent thereof), (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on
the unvested option shares at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting schedule
applicable to those option shares or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant. The determination of option comparability under clause (i)
above shall be made by the Plan Administrator, and its determination shall be
final, binding and conclusive.

                   B. Except as otherwise provided in the agreements creating
the repurchase rights, outstanding repurchase rights, if any, shall terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, provided that such repurchase right shall not lapse to the
extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction
or (ii) such accelerated vesting is precluded by other limitations imposed by
the Plan Administrator at the time the option is issued or the repurchase
right is created.


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                   C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

                   D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the remaining term of the Plan and
(iii) the maximum number and/or class of securities for which any one person
may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances under the Plan per calendar year.

                   E. Repurchase rights which are assigned in connection with
a Corporate Transaction shall be exercisable with respect to the property
issued to the Optionee of Participant upon consummation of such Corporate
Transaction in exchange for the Common Stock held by the Optionee or
Participant subject to the repurchase rights immediately prior to the
Corporate Transaction.

                   F. Except as otherwise limited by the Plan Administrator
at the time an Option is granted, vesting under outstanding options will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within twenty-four (24)
months following the effective date of any Corporate Transaction in which
those options are assumed or replaced and do not otherwise accelerate. Any
options so accelerated shall remain exercisable for fully-vested shares until
the earlier of (i) the expiration of the option term or (ii) the expiration
of the one (1)-year period measured from the effective date of the
Involuntary Termination. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar limitation is not exceeded and the provisions
governing the exercise and holding period are met. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.

                   G. Except as otherwise limited by the Plan Administrator
at the time the option is granted under the Discretionary Option Program or
the repurchase rights are created, the outstanding repurchase rights with
respect to shares held by an Optionee or Participant will automatically lapse
and cease to be exercisable in the event the Optionee's or the Participant's
Service subsequently terminates by means of an Involuntary Termination within
twenty-four (24) months following the effective date of any Corporate
Transaction in which those repurchase rights are assigned or otherwise
continue.


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          H. The outstanding options or repurchase rights shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

    IV.   CHANGE IN CONTROL

          A. In the event of any Change in Control, each outstanding option
under the Discretionary Option Grant Program shall automatically accelerate
so that each such option shall, immediately prior to the effective date of
the Change in Control, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock.

          B. Outstanding repurchase rights, if any, shall terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Change in Control.

    V.    VESTING

                  Notwithstanding any other provision of this agreement, the
vesting schedule imposed with respect to any option grant or share issuance
shall not result in the Optionee or Participant vesting in fewer than 20% per
year for five years from the date of the option grant or share issuance.

    VI.   TAX WITHHOLDING

          A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.

          B. The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan with the right to use shares of Common Stock in satisfaction of all
or part of the Taxes incurred by such holders in connection with the exercise
of their options or the vesting of their shares. Such right may be provided
to any such holder in either or both of the following formats:

          STOCK WITHHOLDING:  The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.

          STOCK DELIVERY:  The election to deliver to the Corporation, at the
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share


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vesting triggering the Taxes) with an aggregate Fair Market Value equal to
the percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.

    VII.  EFFECTIVE DATE AND TERM OF THE PLAN

          A. The Plan shall become effective immediately upon the Plan
Effective Date. Options may be granted under the Discretionary Option Grant
at any time on or after the Plan Effective Date. However, no options granted
under the Plan may be exercised, and no shares shall be issued under the
Plan, until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be
granted and no shares shall be issued under the Plan.

          B. All options outstanding as of the Plan Effective Date shall be
incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated
shall continue to be governed solely by the terms of the documents evidencing
such option, and no provision of the Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.

          C. The Plan shall terminate upon the earliest of (i) the tenth
anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the Plan shall have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with
a Corporate Transaction. Upon such plan termination, all outstanding option
grants and unvested stock issuances shall thereafter continue to have force
and effect in accordance with the provisions of the documents evidencing such
grants or issuances.

    VIII. AMENDMENT OF THE PLAN

          A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations
with respect to stock options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification. In addition, certain amendments may require
stockholder approval if so determined by the Board or pursuant to applicable
laws or regulations.


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          B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and shares of Common Stock may be issued under
the Stock Issuance Program that are in each instance in excess of the number
of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs shall be held in escrow until
there is obtained any required approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under
the Plan. If such approval is not obtained within twelve (12) months after
the date the first such excess issuances are made, then (i) any unexercised
options granted on the basis of such excess shares shall terminate and cease
to be outstanding and (ii) the Corporation shall promptly refund to the
Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the
shares were held in escrow, and such shares shall thereupon be automatically
cancelled and cease to be outstanding.

    IX.   USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.

    X.   REGULATORY APPROVALS

         A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall
be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
stock options granted under it and the shares of Common Stock issued pursuant
to it.

          B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws,
including the filing and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan, and all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

    XI.   NO EMPLOYMENT/SERVICE RIGHTS

          Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person)
or of the Optionee or the Participant, which rights are hereby expressly
reserved by each, to terminate such person's Service at any time for any
reason, with or without cause.


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    XVII. FINANCIAL REPORTS

          The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.






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                                    APPENDIX

         The following definitions shall be in effect under the Plan:

         A.       BOARD shall mean the Corporation's Board of Directors.

         B.       CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:

                           (i) the acquisition, directly or indirectly by any
         person or related group of persons (other than the Corporation or a
         person that directly or indirectly controls, is controlled by, or is
         under common control with, the Corporation), of beneficial ownership
         (within the meaning of Rule 13d-3 of the 1934 Act) of securities
         possessing more than fifty percent (50%) of the total combined voting
         power of the Corporation's outstanding securities pursuant to a tender
         or exchange offer made directly to the Corporation's stockholders which
         the Board does not recommend such stockholders to accept, or

                           (ii) a change in the composition of the Board over a
         period of thirty-six (36) consecutive months or less such that a
         majority of the Board members ceases, by reason of one or more
         contested elections for Board membership, to be comprised of
         individuals who either (A) have been Board members continuously since
         the beginning of such period or (B) have been elected or nominated for
         election as Board members during such period by at least a majority of
         the Board members described in clause (A) who were still in office at
         the time the Board approved such election or nomination.

         C.       CODE shall mean the Internal Revenue Code of 1986, as amended.

         D.       COMMON STOCK shall mean the Corporation's common stock.

         E.       CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

                           (i) a merger or consolidation in which securities
         possessing more than fifty percent (50%) of the total combined voting
         power of the Corporation's outstanding securities are transferred to a
         person or persons different from the persons holding those securities
         immediately prior to such transaction, or

                           (ii) the sale, transfer or other disposition of all
         or substantially all of the Corporation's assets.

          F.       CORPORATION shall mean Digirad Corporation, a Delaware
corporation, and its successors.

          G.       DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.


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          H.       EMPLOYEE shall mean an individual who is in the employ of
the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.

          I.       EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.

          J.       FAIR MARKET VALUE per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:

                           (i) If the Common Stock is at the time traded on the
         Nasdaq National Market, then the Fair Market Value shall be deemed
         equal to the closing selling price per share of Common Stock on the
         date in question, as such price is reported on the Nasdaq National
         Market or any successor system. If there is no closing selling price
         for the Common Stock on the date in question, then the Fair Market
         Value shall be the closing selling price on the last preceding date for
         which such quotation exists.

                           (ii) If the Common Stock is at the time listed on any
         Stock Exchange, then the Fair Market Value shall be deemed equal to the
         closing selling price per share of Common Stock on the date in question
         on the Stock Exchange determined by the Plan Administrator to be the
         primary market for the Common Stock, as such price is officially quoted
         in the composite tape of transactions on such exchange. If there is no
         closing selling price for the Common Stock on the date in question,
         then the Fair Market Value shall be the closing selling price on the
         last preceding date for which such quotation exists.

                           (iii) For purposes of any option grants made on the
         Underwriting Date, the Fair Market Value shall be deemed to be equal to
         the price per share at which the Common Stock is to be sold in the
         initial public offering pursuant to the Underwriting Agreement.

                           (iv) For purposes of any option grants made prior to
         the Underwriting Date, the Fair Market Value shall be determined by the
         Plan Administrator, after taking into account such factors as it deems
         appropriate.

          K.       INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

          L.       INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:

                           (i) such individual's involuntary dismissal or
         discharge by the Corporation for reasons other than Misconduct, or

                           (ii) such individual's voluntary resignation
         following (A) a change in his or her position with the Corporation
         which materially reduces his or her level of


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<Page>

         responsibility, (B) a reduction in his or her level of compensation
         (including base salary, fringe benefits and participation in any
         corporate-performance based bonus or incentive programs) by more than
         fifteen percent (15%) or (C) a relocation of such individual's place of
         employment by more than fifty (50) miles, provided and only if such
         change, reduction or relocation is effected by the Corporation without
         the individual's consent.

          M.       MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized
use or disclosure by such person of confidential information or trade secrets
of the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds
for the dismissal or discharge of any Optionee, Participant or other person
in the Service of the Corporation (or any Parent or Subsidiary).

          N.       1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

          O.       NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.

          P.       OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant Program.

          Q.       PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

          R.       PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.

          S.       PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean
the inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.

          T.       PLAN shall mean the Corporation's 1997 Stock Option/Stock
Issuance Plan, as set forth in this document.

          U.       PLAN ADMINISTRATOR shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to one or more classes of eligible persons, to the
extent such entity is carrying out its administrative functions under those
programs with respect to the persons under its jurisdiction.


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          V.       PLAN EFFECTIVE DATE shall mean the date on which the Plan was
adopted by the Board.

          W.       PRIMARY COMMITTEE shall mean the committee of two (2) or
more non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders following the Section 12 Registration Date.

          X.       SECONDARY COMMITTEE shall mean a committee of two (2) or
more Board members appointed by the Board to administer any aspect of Plan
not required hereunder to be administered by the Primary Committee. The
members of the Secondary Committee may be Board members who are Employees
eligible to receive discretionary option grants or direct stock issuances
under the Plan or any other stock option, stock appreciation, stock bonus or
other stock plan of the Corporation (or any Parent or Subsidiary).

          Y.       SECTION 12 REGISTRATION DATE shall mean the date on which
the Common Stock is first registered under Section 12(g) or Section 15 of the
1934 Act.

          Z.       SECTION 16 INSIDER shall mean an officer or director of
the Corporation subject to the short-swing profit liabilities of Section 16
of the 1934 Act.

          AA.      SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non--employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.

          AB.      STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.

          AC.      STOCK ISSUANCE AGREEMENT shall mean the agreement entered
into by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.

          AD.      STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.

          AE.      SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

          AF.      TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those
options or the vesting of those shares.


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<Page>

          AG.      10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

          AH.      UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

          AI.      UNDERWRITING DATE shall mean the date on which the
Underwriting Agreement is executed and priced in connection with an initial
public offering of the Common Stock.


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