DREXLER TECHNOLOGY CORPORATION
                              AMENDED AND RESTATED
                                STOCK OPTION PLAN

      1. PURPOSES. Drexler Technology Corporation (hereinafter called the
"Company") has adopted this Stock Option Plan (this "Plan") to enhance the
concern of the Company's key employees, officers, directors, and consultants in
the success of the Company by giving them an ownership interest in the Company,
and to give them an incentive to continue their service to the Company.

      2. STOCK SUBJECT TO PLAN. The Company shall reserve 3,450,000 shares of
its $0.01 par value Common Stock (hereinafter called the "Shares") to be issued
upon exercise of the options which may be granted from time to time under this
Plan. As it may from time to time determine, the Board of Directors of the
Company (hereinafter called the "Board") may authorize that the Shares may be
comprised, in whole or in part, of authorized but unissued shares of the Common
Stock of the Company or of issued shares which have been reacquired. If options
granted under this Plan terminate or expire before being exercised in whole or
in part, the Shares subject to those options which have not been issued may be
subjected to subsequent options granted under this Plan.

      The number of shares covered by options granted to any person during any
twelve month period shall not exceed 100,000 shares, subject to adjustment in
accordance with Section 5a. However, in connection with such person's initial
service to the Company, he or she may be granted options to purchase up to an
additional 100,000 shares.

      3. ADMINISTRATION OF THIS PLAN. The Board shall appoint a Stock Option
Committee (hereinafter called the "Committee") to administer this Plan which
Committee shall consist of not less than two (2) members of the Board, each of
whom shall be a "Non-Employee Director" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. Subject to the express provisions
of this Plan and guidelines which may be adopted from time to time by the Board,
the Committee shall have plenary authority in its discretion (a) to determine
the individuals to whom, and the time at which, options are granted, and the
number and purchase price of the Shares subject to each option; (b) to determine
whether the options granted shall be "incentive stock options" within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended
(hereinafter called the "Code"), or non-statutory stock options, or both; (c) to
interpret this Plan and prescribe, amend, and rescind rules and regulations
relating to it; (d) to determine the terms and provisions (and amendments
thereof) of the respective option agreements subject to Section 6 of this Plan,
which need not be identical, including, if the Committee shall determine that a
particular option is to be an incentive stock option, such terms and provisions
(and amendments thereof) as the Committee deems necessary to provide for an
incentive stock option or to conform to any change in any law, regulation,
ruling or interpretation applicable to incentive stock options; and (e) to make
any and all determinations which the Committee deems necessary or advisable in
administering this Plan. The Committee's determination on the foregoing matters
shall be conclusive. The Committee may delegate any of the foregoing authority
to the Chief Executive Officer with respect to options granted to or


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which are held by persons who are neither officers nor directors of the Company.

      4. PERSONS ELIGIBLE. The Committee may grant incentive stock options to
key employees of the Company or its subsidiaries (including officers and
directors) and non-statutory stock options to key employees or consultants
(including officers and directors) of the Company or its subsidiaries. For this
purpose, "employee" shall conform to the requirements of Section 422A of the
Code, and "subsidiary" means subsidiary corporations as defined in Section 425
of the Code.

      The aggregate fair market value (determined as of the time the option is
granted) of the Shares with respect to which incentive stock options are
exercisable by an optionee for the first time during any calendar year (under
all incentive stock option plans of the Company or its parent or subsidiaries)
shall not exceed $100,000.

      5. CHANGES IN CAPITAL STRUCTURE.

      a. Effect on this Plan. In the event of changes in the outstanding capital
stock of the Company by reason of any stock dividend, stock split or reverse
split, reclassification, recapitalization, merger or consolidation, acquisition
of 80% or more of its gross assets or stock, reorganization or liquidation, the
Committee and/or the Board shall make such adjustments in the aggregate number
and class of shares available under this Plan as it deems appropriate, and such
determination shall be final, binding, and conclusive.

      b. In Outstanding Options. Should a stock dividend, stock split, reverse
stock split, reclassification, or recapitalization occur, then the Committee
and/or the Board shall make such adjustments in (i) the number and class of
shares to which optionees will thereafter be entitled upon exercise of their
options and (ii) the price which optionees shall be required to pay upon such
exercise as it in its sole discretion in good faith deems appropriate, and such
determination shall be final, binding, and conclusive. Notwithstanding the
foregoing, such adjustment shall have the result that an optionee exercising an
option subsequent to such occurrence would pay the same aggregate exercise price
to exercise the entire option and would then hold the same class and aggregate
number of shares as if such optionee would have exercised the outstanding option
immediately prior to such occurrence.

      c. In the event of any merger or consolidation of the Company (except with
a subsidiary) or any acquisition of 80% or more of its gross assets or stock, or
any reorganization or liquidation of the Company (an "Event"), the Board shall
make arrangements (the "Arrangements") which shall be binding upon the holders
of unexpired options then outstanding under this Plan as the Board, in its sole
discretion, in good faith determines to be in the best interests of the Company,
which determination shall be final, binding, and conclusive. The possible
Arrangements include, but are not limited to, the substitution of new options
for any portion of such unexpired options, the assumption of any portion of such
unexpired options by any successor to the Company, the acceleration of the
expiration date of any portion of such unexpired options to a date not earlier
than thirty (30) days after notice to the optionee, or the cancellation of such
portion in exchange for the payment by any successor to the Corporation of
deferred compensation to the optionee, in an amount equal to the difference
between the fair market value of the Shares subject to such unexpired portion
and the aggregate exercise price of the Shares under the terms of such unexpired
portion on the date of the Event, in installments which correspond to the
vesting schedule of the unexpired option. The Board shall not be obligated to
arrange such substitution or


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assumption to comply with Section 425(a) of the Code or to accelerate the
exercisability of a portion of an option when it accelerates the expiration date
of such portion. The Board or Committee may from time to time issue guidelines
as to what Arrangements it deems appropriate should an Event occur. The
guidelines currently issued by the Board of Directors are attached hereto as
Attachment A. These guidelines may be changed at any time without notice.
Accordingly, optionees have no vested right with respect to the Arrangements
which may be made upon the occurrence of an Event.

      6. TERMS AND CONDITIONS OF OPTIONS. Each option granted under this Plan
shall be evidenced by a stock option agreement (hereinafter called "Agreement")
which is not inconsistent with this Plan, and the form of which the Committee
and/or Board may from time to time determine, provided that the Agreement shall
contain the substance of the following:

      a. Option Price. The option price shall be not less than 100% of the fair
market value of the Shares at the time the option is granted, which shall be the
date the Committee and/or Board, or its delegate, awards the grant. If the
optionee, at the time the option is granted, owns stock possessing more than 10%
of the total combined voting power of all the classes of stock of the Company or
of its parent or subsidiaries (a "Principal Shareholder"), the option price of
incentive stock options granted such Principal Shareholder shall be not less
than 110% of the fair market value of the Shares at the time the option is
granted. The fair market value of the Shares shall be determined and the option
price of the Shares set by the Committee and/or Board or its delegate in
accordance with the valuation methods described in Section 20.2031-2 of the
Treasury Regulations.

      b. Method of Exercise. At the time of purchase, Shares purchased under
options shall be paid for in full either (i) in cash, (ii) at the discretion of
the Board, with a promissory note secured by the Shares purchased, (iii) at the
discretion of the Committee and/or Board, with outstanding stock of the Company
at such value as the Board shall determine in its sole discretion to be the fair
market value of such stock on the date of exercise in accordance with the
valuation methods discussed in Section 20.2031-2 of the Treasury Regulations, or
(iv) a combination of promissory note (if permitted pursuant to (ii) above),
stock (if permitted pursuant to (iii) above), and/or cash. If outstanding stock
is used as payment and such stock was acquired upon prior exercise of an option
granted under this Plan, then such stock must have been held by the optionee for
at least one year subsequent to such prior exercise and two years subsequent to
the grant of the prior exercised option. To the extent that the right to
purchase Shares has accrued under an option, the optionee may exercise said
option from time to time by giving written notice to the Company stating the
number of Shares with respect to which the optionee is exercising the option,
and submitting with said notice payment of the full purchase price of said
Shares either in cash or, at the discretion of the Board and/or Committee as
described above, with a promissory note, outstanding stock of the Company, or a
combination of cash, promissory note, and/or such stock. As soon as practicable
after receiving such notice and payment, the Company shall issue, without
transfer or issue tax to the optionee (or other person entitled to exercise the
option), and at the main office of the Company or such other place as shall be
mutually acceptable, a certificate or certificates representing such Shares out
of authorized but unissued Shares or reacquired Shares of its capital stock, as
the Board and/or Committee, or its delegate, may elect, for the number of Shares
to be delivered. The time of such delivery may be postponed by the Company for
such period as may be required for it with reasonable diligence to comply with
such procedures as may, in the opinion of counsel to the Company, be desirable
in view of federal and state laws, including corporate securities laws and


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revenue and taxation laws. If the optionee (or other person entitled to exercise
the option) fails to accept delivery of any or all of the number of Shares
specified in such notice upon tender of delivery of the certificates
representing them, the right to exercise the option with respect to such
undelivered Shares may be terminated.

      c. Option Term. The Committee and/or Board or its delegate may grant
options for any term, but shall not grant any options for a term longer than ten
(10) years from the date the option is granted (except in the case of an
incentive stock option granted to a Principal Shareholder in which case the term
shall be no longer than five (5) years from the date the option is granted).
Each option shall be subject to earlier termination as provided in this Section
6 of this Plan.

      d. Exercise of Options. Each option granted under this Plan shall be
exercisable on such date or dates, upon or after the occurrence of certain
events, or upon or after the achievement of certain performance milestones
(which dates may be accelerated or which occurrences or achievements may be
waived in whole or in part or extended at the discretion of the Committee and/or
Board or its delegate) and during such period and for such number of Shares as
shall be determined by the Committee and/or Board or its delegate. An incentive
option granted to a non-officer may not be exercised at any time unless the
optionee shall have continuously served, to the extent determined by the
Committee and/or Board or its delegate, as an employee of the Company or its
subsidiary throughout a period commencing at the date an option is granted and
ending no more than three (3) months and no less than thirty (30) days before an
attempted exercise of the option, and, if applicable, unless the Committee
and/or Board or its delegate shall determine and notify the optionee in writing
that certain events have occurred or certain performance milestones have been
achieved.

      e. Nonassignability of Option Rights. No option shall be assignable or
transferable by the optionee except by will or by the laws of descent and
distribution. During the life of an optionee, the option shall be exercisable
only by the optionee.

      f. Effect of Termination of Employment or Death or Disability. In the
event the optionee's employment with the Company and/or its subsidiaries ceases,
as determined by the Committee, during the optionee's lifetime for any reason,
including retirement, any incentive option or unexercised portion thereof
granted to a non-officer optionee which is otherwise exercisable shall terminate
unless exercised within a period not to exceed three (3) months nor to be less
than thirty (30) days of the date on which such employment ceased but not later
than the date of expiration of the option period. In the event of the death or
disability (as defined in Code Section 22(e)(3)) of the optionee while employed
or within a period not to exceed three months nor to be less than thirty (30)
days of the date on which such employment ceases, any option or unexercised
portion thereof granted to the optionee, if otherwise exercisable by the
optionee at the date of death or disability, may be exercised by the optionee
(or by the optionee's personal representatives, heirs or legatees) at any time
prior to the expiration of one year from the date of death or disability of the
optionee but not later than ten (10) years from the date of grant of such option
except that, in the case of an incentive option granted to a Principal
Shareholder, not later than five (5) years from the date of grant of such
option.

      g. Rights of Optionee. The optionees shall have no rights as a stockholder
with respect to any Shares subject to an option until the date of issuance of a
stock certificate to the optionee for such Shares. No


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adjustment shall be made for dividends or other rights of which the record date
is prior to the date such stock certificate is issued. Neither this Plan, nor
any action or agreement thereunder, shall confer any rights of employment, any
rights to election or retention as an officer or director, or any rights to
serve as a consultant.

      7. USE OF PROCEEDS. The proceeds from the sale of stock pursuant to
options granted under this Plan shall constitute general funds of the Company.

      8. AMENDMENT OF PLAN. The Board of Directors may at any time amend this
Plan, provided that no amendment may affect any then outstanding options or any
unexercised portions thereof absent the optionee's consent, and provided further
that any such amendment materially increasing the number of Shares reserved
under this Plan, materially altering the persons or class of persons eligible to
be granted stock options under this Plan, causing options granted to employees
and intended to be incentive options under this Plan not to qualify as
"incentive stock options" under Section 422A of the Code, or amending this
Section 8 shall be subject to shareholder approval. Any amendment to this Plan
which would cause the acquisition or disposition of an option granted under this
Plan by an officer or director of the Company not to be exempt from the
operation of Section 16(b) of the Securities Exchange Act of 1934 pursuant to
rules and regulations promulgated pursuant to such Section, case law or SEC
releases or no-action letters interpreting such Section, or new Federal statute
or amendments to such Section, shall also be subject to shareholder approval.

      9. EFFECTIVE DATE AND TERMINATION OF PLAN. This Plan was adopted by the
Board of Directors on November 30, 1990, and was approved by the shareholders on
March 1, 1991. This Plan has been amended from time as permitted hereunder, most
recently on September 1, 2000. The Board may terminate this Plan at any time. If
not earlier terminated, this Plan shall terminate May 16, 2010. Termination of
this Plan will not affect rights and obligations theretofore granted and then in
effect.

      This Plan, the granting of any option hereunder, and the issuance of stock
upon the exercise of any option, shall be subject to such approval or other
conditions as may be required or imposed by any regulatory authority having
jurisdiction to issue regulations or rules with respect thereto, including the
securities laws of various governmental entities.

      10. AUTOMATIC OPTION GRANTS TO DIRECTORS. Subject to registration and
qualification under federal and state securities laws as is advised by counsel,
the Company's current and future directors are hereby granted options under this
Plan as follows: (i) on the date of the Company's Annual Meeting of
Stockholders, each of the Company's Non-Employee Directors (as defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended, but whether or not
such director serves as a member of the Stock Option Committee), who is
re-elected at such meeting to another term as a director, and who has served the
Company as a director for the immediately preceding six-month period, shall
automatically and without any further action by the Board be granted a
Non-Statutory Stock Option to purchase 6,000 shares of the Company's Common
Stock; and (ii) on the date any person first becomes a director, whether through
election by the Company's shareholders or appointment by the Board of Directors
to fill a vacancy, each such person shall automatically and without further
action by the Board be granted a Non-Statutory Stock Option to purchase 15,000
shares of the Company's Common Stock.


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      The exercise price for such options shall be equal to the trading price
for the Company's stock on the date of grant in the over-the counter market
calculated pursuant to subparagraphs (b) and (c) of Section 20.2031-2 of the
Treasury Regulations. The date of grant of an option shall, for all purposes, be
the date determined in accordance with the terms of this Section 10. The
foregoing options shall be for a term of ten (10) years and are to be
exercisable as follows: (i) the 6,000 option share grants to re-elected
directors shall be immediately exercisable in full; and (ii) the 15,000 option
share grants to newly elected or appointed directors shall be exercisable in
cumulative increments of one-fourth each at the end of 12 months, 24 months, 36
months, and 48 months if the optionee is still a director of the Company or its
subsidiaries. Upon the occurrence of an event described in Section 5(b) of this
Plan, the number of option shares which a director shall be granted pursuant to
the foregoing formula, and the class of stock which is the subject of such
option grant, shall be automatically adjusted such that directors receiving an
automatic option grant subsequent to the occurrence of such event shall receive
the same aggregate number of option shares, and would then hold the same class
of stock, as if such director had been granted the option prior to the
occurrence of such event.

      In the event an automatic option grant(s) pursuant to this Section 10
would result in option shares having been granted in excess of the number of
option shares then remaining available for grant under this Plan, then such
option grant(s) shall be made contingent upon a proper amendment to this Plan to
accommodate such grants.

      Notwithstanding Section 8 of this Plan, the foregoing automatic option
grant formula may not be amended more than once every six months, other than to
comport with changes to the Internal Revenue Code, the Employee Retirement
Income Security Act, or the rules thereunder.

      11. LIMITED AUTHORITY TO ALTER TERMS OF OPTIONS. Within the parameters of
Section 6 of this Plan, the Board of Directors may, at their discretion, alter
the terms of options to be granted pursuant to Section 10 hereof, or which were
previously granted pursuant to Section 10 hereof.

Stock Option Plan - Amended 9/1/00

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                                  ATTACHMENT A
               TO DREXLER TECHNOLOGY CORPORATION STOCK OPTION PLAN

                Drexler Technology Corporation Board of Directors
                POLICY GUIDELINES FOR ADJUSTMENT OF STOCK OPTIONS
                         IN THE EVENT OF AN ACQUISITION
                           [Adopted November 30, 1990]

      The Company's Stock Option Plan (the "Plan") presently provides that in
the event of a merger or other recapitalization, the Board of Directors shall
make appropriate adjustments to the terms of the outstanding options. The Plan
gives only minor guidance as to what adjustments would be considered
"appropriate."

Policy

      (1) In the event of the acquisition of all or substantially all of the
Company's assets or capital stock, adjustments are deemed "appropriate" if:


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            (a) the vested portion of options may be exercised prior to the
acquisition on not less than 30 days' notice; and

            (b) arrangements are made so that subject to continued employment of
the optionee with the successor corporation, the unvested portion of options
will receive one of the following benefits:

                  (i) a replacement option that can be exercised on the same
vesting schedule at the same total exercise price to purchase the stock or other
securities of the successor corporation that would have been received had the
unvested option shares been outstanding at the time of the acquisition; or

                  (ii) a cash payment made with respect to each option share at
the time of vesting equal to the excess of the per-share value paid for the
acquisition (whether in cash or in securities of the successor corporation) over
the option exercise price.

      (2) In the event the employment relationship between the employee and the
successor corporation is terminated within one year of the date of the sale of
the Company, it is intended that 100% of the remaining unvested portion of all
options held by such employee on the date of the sale of the Company would vest
and remain exercisable for at least 90 days after the termination, provided
that:

            (a) the employee had been employed by the Company continuously
(except for approved leaves of absence) for at least two years prior to the date
of the sale of the Company; and

            (b) the employment relationship of the successor corporation and the
employee was not terminated by either:

                  (i) resignation by the employee; or

                  (ii) by the successor corporation due to acts of moral
turpitude on the part of the employee such as theft, embezzlement, fraud,
dishonesty, misappropriation or conversion of funds committed against the
Company or successor corporation, or due to the employee's material breach of an
agreement with the Company or successor corporation concerning disclosure and
ownership of inventions, conflict of interest, or confidentiality of
information.

      In the event the successor corporation had not assumed outstanding Company
options but rather was paying deferred compensation whenever Company options
vested, then the successor corporation would pay the employee the amount
corresponding to such accelerated vesting.

Effect

      This policy guideline may be changed at any time by the Stock Option
Committee or the Company's Board of Directors. It does not constitute a part of
this Plan. The right of the Company or its successors to terminate the
employment of an optionee, with or without cause, shall not be affected by this
guideline.

Stock Option Plan Attachment A


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