Exhibit 10.3

AMERICAN SUPERCONDUCTOR CORPORATION

INCENTIVE 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. Incentive Stock Option. This option is intended to qualify as an incentive
stock option (“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”) as to not more than the number of shares set
forth in the table below during the respective 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 option date here) (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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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. An example of an option
exercise notice is attached to this Agreement as Exhibit A.

(c) Continuous Employment 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 of the Company. For all purposes of this
option, (i) “employment” shall be defined in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations or any successor regulations,
and (ii) if this option shall be assumed or a new option substituted therefor in
a transaction to which Section 424(a) of the Code applies, employment by such
assuming or substituting corporation (hereinafter called the “Successor
Corporation”) shall be considered for all purposes of this option to be
employment by the Company.

(d) Exercise Period Upon Termination of Employment. If the Optionee ceases to be
employed by the Company 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. The Company’s
obligation to deliver shares upon the exercise of this option shall be subject
to the satisfaction of all applicable federal, state and local income and
employment tax withholding requirements, arising by reason of this option being
treated as a non-statutory option or otherwise. 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 employee of the Company, this option shall
be exercisable, within the period of 180 days following the date of death or
disability of the Optionee (but in no event after 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 “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.

 

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

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, and/or (ii) by any other means (such as 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) which the
Board of Directors determines, in its sole discretion, to accept, provided such
means 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).

(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) 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.

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

 

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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. Except as provided in paragraph (e) of
Section 3, 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. 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 of the Optionee 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.

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
shall be made by the Board of Directors, whose determination as to what
adjustments, if any, shall be made and the extent thereof shall be final,
binding and conclusive. No fractional shares shall be issued pursuant to this
option on account of any such adjustments.

 

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(c) Limits on Adjustments. No adjustment shall be made under this Section 9
which would, within the meaning of any applicable provision of the Code,
constitute a modification, extension or renewal of this option or a grant of
additional benefits to the Optionee.

10. Mergers, Consolidation, Distributions, Liquidations Etc. In the event of a
consolidation or merger 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 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’s 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.

 

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13. Limitations on Disposition of Incentive Stock Option Shares. It is
understood and intended that this option shall qualify as an “incentive stock
option” as defined in Section 422 of the Code. Accordingly, the Optionee
understands that in order to obtain the benefits of an incentive stock option
under Section 421 of the Code, no sale or other disposition may be made of any
shares acquired upon exercise of the option within one year after the day of the
transfer of such shares to him, nor within two years after the grant of the
option. If the Optionee intends to dispose, or does dispose (whether by sale,
exchange, gift, transfer or otherwise), of any such shares within said periods,
he or she will notify the Company in writing within ten days after such
disposition.

14. Miscellaneous.

(a) Except as provided herein, this option may not be amended or otherwise
modified unless such amendment or modification is 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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