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                                                                   EXHIBIT 10.1

                     THIS MATERIAL CONSTITUTES PART OF THE
                    PROSPECTUS DATED MAY 28, 1996, COVERING
                  THESE SECURITIES, WHICH HAVE BEEN REGISTERED
                        UNDER THE SECURITIES ACT OF 1933
    
                         DREXLER TECHNOLOGY CORPORATION

                             1991 STOCK OPTION PLAN


         1.      Purposes.  Drexler Technology Corporation (hereinafter called
the "Company") has adopted this 1991 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 1,920,000
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.  In addition, those of the shares reserved for issuance under
the Company's 1986 Stock Option Plan on March 1, 1991, (i) which were not then
subject to outstanding options or (ii) which were then subject to outstanding
options which subsequently lapse, shall also be reserved for issuance pursuant
to the exercise of options 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.

    

         3.      Administration of this Plan.  The Board shall appoint a Stock
Option Committee (hereinafter called the "Committee") which shall consist of not
less than two (2) members of the Board, and, at the election of the Board or if
the Board consists of less than two directors, may consist of the entire Board,
to administer this Plan.  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 President with respect to options granted to or which are held by persons
who are neither officers nor directors of the Company.

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         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 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 percent 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 percent 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 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


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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 ten percent (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 or the
Company's 575,000 share 1986 Stock Option 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 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

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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 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

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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 was most recently amended by the board
of directors on May 28, 1996, which amendment was approved by the shareholders
on September 20, 1996.  The Board may terminate this Plan at any time.  If not
earlier terminated, this Plan shall terminate November 30, 2000. 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
Shareholders, each of the Company's directors who 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 nine-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.

                 The exercise price for such options shall be equal to the
trading price of 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 five 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-third each at the end of 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.

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                 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, except
insofar as a term relates to (a) the persons eligible to participate in the
automatic option grant program, or (b) the timing, pricing, or amount of an
option granted or to be granted pursuant to such Section 10.




Attachment:  2 pages

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                     THIS MATERIAL CONSTITUTES PART OF THE
                     PROSPECTUS DATED MAY 28, 1996 COVERING
                  THESE SECURITIES, WHICH HAVE BEEN REGISTERED
                        UNDER THE SECURITIES ACT OF 1933

    
                                  ATTACHMENT A


                         DREXLER TECHNOLOGY CORPORATION
                             COMPENSATION COMMITTEE
                POLICY GUIDELINE FOR ADJUSTMENT OF STOCK OPTIONS
                         IN THE EVENT OF AN ACQUISITION

                               November 30, 1990


Background

         The Company's 1991 Stock Option Plan (the "Plan") presently provides
that in the event of a merger or other recapitalization, this Committee or 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:

                 (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.


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         (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 this 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.


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