Exhibit 10.4

AMERICAN SUPERCONDUCTOR CORPORATION

NON-STATUTORY STOCK OPTION AGREEMENT

1. Grant of Option. American Superconductor Corporation, a Delaware corporation
(the “Company”), hereby grants on this             day of                     ,
to                     (the “Optionee”) an option, pursuant to the Company’s
1996 Stock Incentive Plan (the “Plan”), to purchase an aggregate of
                    shares of Common Stock (“Common Stock”) of the Company at a
price of $                     per share, purchasable as set forth in and
subject to the terms and conditions of this option and the Plan. Except where
the context otherwise requires, the term “Company” shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the “Code”).

2. Non-Statutory Stock Option. This option is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

3. Exercise of Option and Provisions for Termination.

(a) Vesting Schedule. Except as otherwise provided in this Agreement, this
option may be exercised prior to the tenth anniversary of the date of grant
(hereinafter the “Expiration Date”) in installments as to not more than the
number of shares set forth in the table below during the respective installment
periods set forth in the table below.

 

Exercise Period

  

Percentage of Shares as to which Option is Exercisable

Less than one year from (fill in date of option) (the “Vesting Date”)

  

At least one year but less than two years from the Vesting Date

  

At least two years but less than three years from the Vesting Date

  

At least three years but less than four years from the Vesting Date

  

At least four years but less than five years from the Vesting Date

  

At least five years from the Vesting Date

  

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The right of exercise shall be cumulative so that if the option is not exercised
to the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to all shares not so purchased at
any time prior to the Expiration Date or the earlier termination of this option.
This option may not be exercised at any time on or after the Expiration Date,
except as otherwise provided in Section 3(e) below.

(b) Exercise Procedure. Subject to the conditions set forth in this Agreement,
this option shall be exercised by the Optionee’s delivery of written notice of
exercise to the Treasurer of the Company, specifying the number of shares to be
purchased and the purchase price to be paid therefor and accompanied by payment
in full in accordance with Section 4. Such exercise shall be effective upon
receipt by the Treasurer of the Company of such written notice together with the
required payment. The Optionee may purchase less than the number of shares
covered hereby, provided that no partial exercise of this option may be for any
fractional share or for fewer than ten whole shares.

(c) Continuous Relationship with the Company Required. Except as otherwise
provided in this Section 3, this option may not be exercised unless the
Optionee, at the time he or she exercises this option, is, and has been at all
times since the date of grant of this option, an employee, officer or director
of, or consultant or advisor to, the Company (an “Eligible Optionee”).

(d) Termination of Relationship with the Company. If the Optionee ceases to be
an Eligible Optionee for any reason, then, except as provided in paragraphs
(e) and (f) below, the right to exercise this option shall terminate [60 days]
after such cessation (but in no event after the Expiration Date), provided that
this option shall be exercisable only to the extent that the Optionee was
entitled to exercise this option on the date of such cessation. Notwithstanding
the foregoing, if the Optionee, prior to the Expiration Date, materially
violates the non-competition or confidentiality provisions of any employment
contract, confidentiality and nondisclosure agreement or other agreement between
the Optionee and the Company, the right to exercise this option shall terminate
immediately upon written notice to the Optionee from the Company describing such
violation.

(e) Exercise Period Upon Death or Disability. If the Optionee dies or becomes
disabled (within the meaning of Section 22(e)(3) of the Code) prior to the
Expiration Date while he or she is an Eligible Optionee, or if the Optionee dies
within three months after the Optionee ceases to be an Eligible Optionee (other
than as the result of a termination of such relationship by the Company for
“cause” as specified in paragraph (f) below), this option shall be exercisable,
within the period of [180 days] following the date of death or disability of the
Optionee (whether or not such exercise occurs before the Expiration Date), by
the Optionee or by the person to whom this option is transferred by will or the
laws of descent and distribution, provided that this option shall be exercisable
only to the extent that this option was exercisable by the Optionee on the date
of his or her death or disability. Except as otherwise indicated by the context,
the term

 

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“Optionee”, as used in this option, shall be deemed to include the estate of the
Optionee or any person who acquires the right to exercise this option by bequest
or inheritance or otherwise by reason of the death of the Optionee.

(f) Discharge for Cause. If the Optionee, prior to the Expiration Date, is
discharged by the Company for “cause” (as defined below), the right to exercise
this option shall terminate immediately upon such cessation of employment.
“Cause” shall mean willful misconduct by the Optionee in connection with the
Optionee’s employment or willful failure to perform his or her responsibilities
in the best interests of the Company (including, without limitation, breach by
the Optionee of any provision of any employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the Optionee
and the Company), as determined by the Company, which determination shall be
conclusive. The Optionee shall be considered to have been discharged “for cause”
if the Company determines, within 30 days after the Optionee’s resignation, that
discharge for cause was warranted.

4. Payment of Purchase Price.

(a) Method of Payment. Payment of the purchase price for shares purchased upon
exercise of this option shall be made (i) by delivery to the Company of cash or
a check to the order of the Company in an amount equal to the purchase price of
such shares, (ii) subject to the consent of the Company, by delivery to the
Company of shares of Common Stock of the Company then owned by the Optionee
having a fair market value equal in amount to the purchase price of such shares,
(iii) by any other means which the Board of Directors determines are consistent
with the purpose of the Plan and with applicable laws and regulations
(including, without limitation, the provisions of Rule 16b-3 under the
Securities Exchange Act of 1934 and Regulation T promulgated by the Federal
Reserve Board), or (iv) by any combination of such methods of payment.

(b) Valuation of Shares or Other Non-Cash Consideration Tendered in Payment of
Purchase Price. For the purposes hereof, the fair market value of any share of
the Company’s Common Stock or other non-cash consideration which may be
delivered to the Company in exercise of this option shall be determined in good
faith by the Board of Directors of the Company.

(c) Delivery of Shares Tendered in Payment of Purchase Price. If the Optionee
exercises this option by delivery of shares of Common Stock of the Company, the
certificate or certificates representing the shares of Common Stock of the
Company to be delivered shall be duly executed in blank by the Optionee or shall
be accompanied by a stock power duly executed in blank suitable for purposes of
transferring such shares to the Company. Fractional shares of Common Stock of
the Company will not be accepted in payment of the purchase price of shares
acquired upon exercise of this option.

(d) Restrictions on Use of Option Stock. Notwithstanding the foregoing, no
shares of Common Stock of the Company may be tendered in payment of the purchase
price of shares purchased upon exercise of this option if the shares to be so
tendered were acquired within twelve (12) months before the date of such tender,
through the exercise of an option granted under the Plan or any other stock
option or restricted stock plan of the Company.

 

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5. Delivery of Shares; Compliance With Securities Laws, Etc.

(a) General. The Company shall, upon payment of the option price for the number
of shares purchased and paid for, make prompt delivery of such shares to the
Optionee, provided that if any law or regulation requires the Company to take
any action with respect to such shares before the issuance thereof, then the
date of delivery of such shares shall be extended for the period necessary to
complete such action.

(b) Listing, Qualification, Etc. This option shall be subject to the requirement
that if, at any time, counsel to the Company shall determine that the listing,
registration or qualification of the shares subject hereto upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
hereunder, this option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, disclosure or
satisfaction of such other condition shall have been effected or obtained on
terms acceptable to the Board of Directors. Nothing herein shall be deemed to
require the Company to apply for, effect or obtain such listing, registration,
qualification or disclosure, or to satisfy such other condition.

6. Nontransferability of Option. This option is personal and no rights granted
hereunder may be transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) nor shall any such rights be subject
to execution, attachment or similar process, except that this option may be
transferred (i) by will or the laws of descent and distribution, (ii) pursuant
to a qualified domestic relations order as defined in Section 414(p) of the Code
or (iii) to a member of the immediate family of the Optionee (which shall mean
the Optionee’s spouse, children, parents, grandchildren and siblings) or to a
trust established for the benefit of members of the Optionee’s immediate family
or the Optionee. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this option or of such rights contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon this option
or such rights, this option and such rights shall, at the election of the
Company, become null and void.

7. No Special Employment or Similar Rights. Nothing contained in the Plan or
this option shall be construed or deemed by any person under any circumstances
to bind the Company to continue the employment or other relationship of the
Optionee with the Company for the period within which this option may be
exercised.

8. Rights as a Shareholder. The Optionee shall have no rights as a shareholder
with respect to any shares which may be purchased by exercise of this option
(including, without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) unless and until a certificate
representing such shares is duly issued and delivered to the Optionee. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.

 

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9. Adjustment Provisions.

(a) General. If, through or as a result of any merger, consolidation, sale of
all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased or decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, the
Optionee shall, with respect to this option or any unexercised portion hereof,
be entitled to the rights and benefits, and be subject to the limitations, set
forth in Section 5(b) of the Plan.

(b) Board Authority to Make Adjustments. Any adjustments under this Section 9
will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued pursuant to this option on
account of any such adjustments.

10. Mergers, Consolidation, Distributions, Liquidations Etc. In the event of a
merger or consolidation or sale of all or substantially all of the assets of the
Company in which outstanding shares of Common Stock are exchanged for
securities, cash or other property of any other corporation or business entity,
or in the event of a liquidation of the Company, prior to the Expiration Date or
termination of this option, the Optionee shall, with respect to this option or
any unexercised portion hereof, be entitled to the rights and benefits, and be
subject to the limitations, set forth in Section 10(f) of the Plan.

11. Change in Control. Notwithstanding any other provision of Section 3 of this
Agreement to the contrary, this option shall become immediately exercisable in
full upon a “Change in Control of the Company” (as defined below). For purposes
of this Agreement, a “Change in Control of the Company” shall occur or be deemed
to have occurred only if (i) any “person”, as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (other than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any corporation owned directly
or indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company), is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company’s then outstanding securities; (ii) during
any period of two consecutive years ending during the term of this Agreement,
individuals who at the beginning of such period constitute the Board of
Directors of the Company, and any new director (other than a director designated
by a person who has entered into an agreement with the Company to effect any
transaction described in clause (i), (iii) or (iv) of this Section 11) whose
election by the Board of Directors or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who were either

 

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directors at the beginning of the period or whose election or whose nomination
for election was previously so approved (collectively, the “Disinterested
Directors”), cease for any reason to constitute a majority of the Board of
Directors; (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; or (iv) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company assets.

12. Withholding Taxes. The Company’s obligation to deliver shares upon the
exercise of this option shall be subject to the Optionee’s satisfaction of all
applicable federal, state and local income and employment tax withholding
requirements.

13. Investment Representations; Legends.

(a) Representations. The Optionee represents, warrants and covenants that:

(i) Any shares purchased upon exercise of this option shall be acquired for the
Optionee’s account for investment only, and not with a view to, or for sale in
connection with, any distribution of the shares in violation of the Securities
Act of 1933 (the “Securities Act”), or any rule or regulation under the
Securities Act.

(ii) The Optionee has had such opportunity as he or she has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit the Optionee to evaluate the merits and risks of his or her investment in
the Company.

(iii) The Optionee is able to bear the economic risk of holding such shares
acquired pursuant to the exercise of this option for an indefinite period.

(iv) The Optionee understands that (A) the shares acquired pursuant to the
exercise of this option will not be registered under the Securities Act and are
“restricted securities” within the meaning of Rule 144 under the Securities Act;
(B) such shares cannot be sold, transferred or otherwise disposed of unless they
are subsequently registered under the Securities Act or an exemption from
registration is then available; (C) in any event, an exemption from registration
under Rule 144 or otherwise under the Securities Act not be available for at
least two years and even then will not be available unless a public market then
exists for the Common Stock, adequate information concerning the Company is then
available to the public, and other terms and conditions of Rule 144 are complied
with; and (D) there is now no registration statement on file with the Securities
and Exchange Commission with respect to any stock of the Company and the Company
has no obligation or current intention to register any shares acquired pursuant
to the exercise of this option under the Securities Act.

 

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v) The Optionee agrees that, if the Company offers any of its Common Stock for
sale pursuant to a registration statement under the Securities Act, the Optionee
will not, without the prior written consent of the Company, offer, sell,
contract to sell or otherwise dispose of, directly or indirectly (a
“Disposition”), any shares purchased upon exercise of this option for a period
of 90 days after the effective date of such registration statement.

By making payment upon exercise of this option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 12.

(b) Legends on Stock Certificate. All stock certificates representing shares of
Common Stock issued to the Optionee upon exercise of this option shall have
affixed thereto legends substantially in the following forms, in addition to any
other legends required by applicable state law:

“The shares of stock represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred, sold or otherwise
disposed of in the absence of an effective registration statement with respect
to the shares evidenced by this certificate, filed and made effective under the
Securities Act of 1933, or an opinion of counsel satisfactory to the Company to
the effect that registration under such Act is not required.”

“The shares of stock represented by this certificate are subject to certain
restrictions on transfer contained in an Option Agreement, a copy of which will
be furnished upon request by the issuer.”

 

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14. Miscellaneous.

(a) Except as provided herein, this option may not be amended or otherwise
modified unless evidenced in writing and signed by the Company and the Optionee.

(b) All notices under this option shall be mailed or delivered by hand to the
parties at their respective addresses set forth beneath their names below or at
such other address as may be designated in writing by either of the parties to
one another.

(c) This option shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts.

 

American Superconductor Corporation By:  

 

Title:   Address:   Two Technology Drive   Westborough, MA 01581

 

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OPTIONEE’S ACCEPTANCE

The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of the
Company’s 1996 Stock Incentive Plan.

 

OPTIONEE

 

ADDRESS

 

 

 

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