Document:

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                                                                   Exhibit 10.21

                      AMERICAN SUPERCONDUCTOR CORPORATION

                AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN

     1.   Purpose
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     The purpose of this Amended and Restated 1996 Stock Incentive Plan (the
"Plan") of American Superconductor Corporation, a Delaware corporation (the
"Company"), is to advance the interests of the Company by enhancing its ability
to attract and retain key employees, consultants and others who are in a
position to contribute to the Company's future growth and success.

     2.   Definitions
          -----------

     "Award" means any Option, Stock Appreciation Right, Performance Shares,
Restricted Stock or Unrestricted Stock awarded under the Plan.

     "Board" means the Board of Directors of the Company.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

     "Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, provided that so long as the
Common Stock is registered under Section 12 of the Exchange Act and Rule 16b-3
under the Exchange Act ("Rule 16b-3") incorporates the concept of disinterested
administration, each member of the Committee shall be a "disinterested person"
within the meaning of Rule 16b-3.

     "Common Stock" means the Common Stock, $.01 par value per share, of the
Company.

     "Company" means American Superconductor Corporation and, except where the
context otherwise requires, all present and future subsidiaries of American
Superconductor Corporation as defined in Section 424(f) of the Code.

     "Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Board, to receive amounts due or exercise rights
of the Participant in the event of the Participant's death.  In the absence of
an effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.

     "Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Board in
good faith or in the manner established by the Board from time to time.
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     "Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.

     "Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is not intended to be an
Incentive Stock Option.

     "Option" means an Incentive Stock Option or a Nonstatutory Stock Option.

     "Participant" means a person selected by the Board to receive an Award
under the Plan.

     "Performance Shares" mean shares of Common Stock which may be earned by the
achievement of performance goals established for a Participant under Section 8.

     "Reporting Person" means a person subject to Section 16 of the Exchange Act
or any successor provision.

     "Restricted Period" means the period of time selected by the Board during
which shares subject to a Restricted Stock Award may be repurchased by or
forfeited to the Company.

     "Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 9.

     "Stock Appreciation Right" or "SAR" means a right to receive any excess in
Fair Market Value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.

     "Unrestricted Stock" means shares of Common Stock awarded to a Participant
under Section 9(c).

     3.   Administration
          --------------

     The Plan will be administered by the Board.  The Board shall have authority
to make Awards and to adopt, amend and repeal such administrative rules,
guidelines and practices relating to the Plan as it shall deem advisable from
time to time, and to interpret the provisions of the Plan.  The Board's
decisions shall be final and binding.  No member of the Board shall be liable
for any action or determination relating to the Plan made in good faith.  To the
extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and all determinations under the Plan with respect
thereto, provided that the Board shall fix the maximum amount of such Awards to
be made by such executive officers and a maximum amount for any one Participant.
To the extent permitted by applicable law, the Board may appoint a Committee to
administer the Plan and, in such event, all references to the Board in the Plan
shall mean such Committee or the Board.  All decisions by the Board or the
Committee pursuant to the Plan shall be final and binding on all persons having
or claiming any interest in the Plan or in any Award.

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     4.   Eligibility
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     All of the Company's employees, officers, directors, consultants and
advisors who are expected to contribute to the Company's future growth and
success, other than persons who have irrevocably elected not to be eligible, are
eligible to be Participants in the Plan.  Incentive Stock Options may be awarded
only to persons eligible to receive Incentive Stock Options under the Code.

     5.   Stock Available for Awards
          --------------------------

          (a)    Subject to adjustment under subsection (b) below, Awards may be
made under the Plan for up to 4,850,000 shares of Common Stock. Notwithstanding
the foregoing, the number of shares of Common Stock for which Performance Share
Awards may be granted may not exceed 25% of the total number of shares of Common
Stock for which Awards may be made under the Plan (as such number may be
increased from time to time). If any Award in respect of shares of Common Stock
expires or is terminated unexercised or is forfeited for any reason or settled
in a manner that results in fewer shares outstanding than were initially
awarded, the shares subject to such Award or so surrendered, as the case may be,
to the extent of such expiration, termination, forfeiture or decrease, shall
again be available for award under the Plan, subject, however, in the case of
Incentive Stock Options, to any limitation required under the Code and provided
that shares made available pursuant to this sentence shall be available for
Awards to Reporting Persons only to the extent consistent with Rule 16b-3.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.

          (b)    In the event that there occurs any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or other similar transaction
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available under
the Plan, then the Board, subject, in the case of Incentive Stock Options, to
any limitation required under the Code, shall equitably adjust any or all of (i)
the number and kind of shares in respect of which Awards may be made under the
Plan, (ii) the number and kind of shares subject to outstanding Awards, and
(iii) the award, exercise or conversion price with respect to any of the
foregoing, and if considered appropriate, the Board may make provision for a
cash payment with respect to an outstanding Award, provided that the number of
shares subject to any Award shall always be a whole number.

          (c)    The Board may grant Awards under the Plan in substitution for
stock and stock based awards held by employees of another corporation who
concurrently become employees of the Company as a result of a merger or
consolidation of the employing corporation with the Company (or a subsidiary of
the Company) or the acquisition by the Company (or a subsidiary of the Company)
of property or stock of the employing corporation. The substitute Awards shall
be granted on such terms and conditions as the Board considers appropriate in
the circumstances.

          (d)    Subject to adjustment under Section 5(b), (i) the maximum
number of shares with respect to which an Option, may be granted to any employee
under the Plan shall not exceed 2,000,000 shares per calendar year and (ii) the
maximum number of shares with respect

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to which any other Award may be granted to any employee under the Plan shall not
exceed 250,000 per calendar year. For purposes of calculating such maximum
number pursuant to clause (i) or (ii) above, (a) an Option or other Award shall
continue to be treated as outstanding notwithstanding its repricing,
cancellation or expiration and (b) the repricing of an outstanding Option or
other Award, or issuance of an Option or other Award in substitution for a
cancelled Option or other Award shall be deemed to constitute the grant of a new
additional Option or other Award separate from the original grant of the Option
or other Award that is repriced or cancelled.

     6.   Stock-Options
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          (a)  General
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               (i)    Subject to the provisions of the Plan, the Board may award
Incentive Stock Options and Nonstatutory Stock Options, and determine the number
of shares of Common Stock to be covered by each Option, the option price of such
Option and the conditions and limitations applicable to the exercise of such
Option. The terms and conditions of Incentive Stock Options shall be subject to
and comply with Section 422 of the Code, or any successor provision, and any
regulations thereunder.

               (ii)   The Board shall establish the exercise price at the time
each Option is awarded. In the case of Incentive Stock options, such price shall
not be less than 100% of the Fair Market Value of the Common Stock on the date
of award.

               (iii)  Each Option shall be exercisable at such times and subject
to such terms and conditions as the Board may specify in the applicable Award or
thereafter. The Board may impose such conditions with respect to the exercise of
Options, including conditions relating to applicable federal or state securities
laws, as it considers necessary or advisable.

               (iv)   Options granted under the Plan may provide for the payment
of the exercise price by delivery of cash or check in an amount equal to the
exercise price of such Options or, to the extent permitted by the Board at or
after the award of the Option, by (A) delivery of shares of Common Stock owned
by the optionee for at least six months (or such shorter period as is approved
by the Board), valued at their Fair Market Value, (B) delivery of a promissory
note of the optionee to the Company on terms determined by the Board, (C)
delivery of an irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price or delivery of irrevocable
instructions to a broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.

               (v)    The Board may provide for the automatic award of an Option
upon the delivery of shares to the Company in payment of the exercise price of
an Option for up to the number of shares so delivered.

               (vi)   The Board may at any time accelerate the time at which all
or any part of an Option may be exercised.

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          (b)  Incentive Stock Options
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     Options granted under the Plan which are intended to be Incentive Stock
options shall be subject to the following additional terms and conditions:

               (i)     All Incentive Stock Options granted under the Plan shall,
at the time of grant, be specifically designated as such in the option agreement
covering such Incentive Stock Options. The Option exercise period shall not
exceed ten years from the date of grant.

               (ii)    If any employee to whom an Incentive Stock Option is to
be granted under the Plan is, at the time of the grant of such option, the owner
of stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company (after taking into account the attribution of
stock ownership rule of Section 424(b) and of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:

                       (x)    The purchase price per share of the Common Stock
          subject to such Incentive Stock Option shall not be less than 110% of
          the Fair Market Value of one share of Common Stock at the time of
          grant; and

                       (y)    The option exercise period shall not exceed five
          years from the date of grant.

               (iii)   For so long as the Code shall so provide, options granted
to any employee under the Plan (and any other incentive stock option plans of
the Company) which are intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such options, in the
aggregate, become exercisable for the first time in any one calendar year for
shares of Common Stock with an aggregate Fair Market Value (determined as of the
respective date or dates of grant) of more than $100,000.

               (iv)    No Incentive Stock Option may be exercised unless, at the
time of such exercise, the Participant is, and has been continuously since the
date of grant of his or her Option, employed by the Company, except that:

                       (x)    an Incentive Stock Option may be exercised within
          the period of three months after the date the Participant ceases to be
          an employee of the Company (or within such lesser period as may be
          specified in the applicable option agreement), provided, that the
                                                         --------
          agreement with respect to such Option may designate a longer exercise
          period and that the exercise after such three-month period shall be
          treated as the exercise of a Nonstatutory Stock Option under the Plan;

                       (y)    if the Participant dies while in the employ of the
          Company, or within three months after the Participant ceases to be
          such an employee, the Incentive Stock Option may be exercised by the
          Participant's Designated Beneficiary within the period of one year
          after the date of death (or within such lesser period as may be
          specified in the applicable Option agreement); and

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                       (z)    if the Participant becomes disabled (within the
          meaning of Section 22(e)(3) of the Code or any successor provision
          thereto) while in the employ of the Company, the Incentive Stock
          Option may be exercised within the period of one year after the date
          of disability (or within such lesser period as may be specified in the
          applicable Option agreement).

For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations).  Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.

               (v)     Incentive Stock Options shall not be assignable or
transferable by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution, and,
during the life of the optionee, shall be exercisable only by the optionee.

     7.   Stock Appreciation Rights
          -------------------------

          (a)  The Board may grant SARs entitling recipients on exercise of the
SAR to receive an amount, in cash or Common Stock or a combination thereof (such
form to be determined by the Board), determined in whole or in part by reference
to appreciation in the Fair Market Value of the Common Stock between the date of
the Award and the exercise of the Award. A SAR shall entitle the Participant to
receive, with respect to each share of Common Stock as to which the SAR is
exercised, the excess of the share's Fair Market Value on the date of exercise
over its Fair Market Value on the date the SAR was granted. The Board may also
grant SARs that provide that, following a change in control of the Company (as
defined by the Board at the time of the Award), the holder of such SAR will be
entitled to receive, with respect to each share of Common Stock subject to the
SAR, an amount equal to the excess of a specified value (which may include an
average of values) for a share of Common Stock during a period preceding such
change in control over the Fair Market Value of a share of Common Stock on the
date the SAR was granted.

          (b)  SARs may be granted in tandem with, or independently of, Options
granted under the Plan. A SAR granted in tandem with an Option which is not an
Incentive Stock Option may be granted either at or after the time the Option is
granted. A SAR granted in tandem with an Incentive Stock Option may be granted
only at the time the Option is granted.

          (c)  When SARs are granted in tandem with Options, the following
provisions will apply:

               (i)     The SAR will be exercisable only at such time or times,
and to the extent, that the related Option is exercisable and will be
exercisable in accordance with the procedure required for exercise of the
related Option.

               (ii)    The SAR will terminate and no longer be exercisable upon
the termination or exercise of the related Option, except that a SAR granted
with respect to less than the full number of shares covered by an Option will
not be reduced until the number of shares as

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to which the related Option has been exercised or has terminated exceeds the
number of shares not covered by the SAR.

               (iii)   The Option will terminate and no longer be exercisable
upon the exercise of the related SAR.

               (iv)    The SAR will be transferable only with the related
Option.

`              (v)     A SAR granted in tandem with an Incentive Stock Option
may be exercised only when the market price of the Common Stock subject to the
Option exceeds the exercise price of such Option.

          (d)  A SAR not granted in tandem with an Option will become
exercisable at such time or times, and on such conditions, as the Board may
specify.

          (e)  The Board may at any time accelerate the time at which all or any
part of the SAR may be exercised.

     8.   Performance Shares
          ------------------

          (a)  The Board may make Performance Share Awards entitling recipients
to acquire shares of Common Stock upon the attainment of specified performance
goals. The Board may make Performance Share Awards independent of or in
connection with the granting of any other Award under the Plan. The Board in its
sole discretion shall determine the performance goals applicable under each such
Award, the periods during which performance is to be measured, and all other
limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Board may rely on the performance goals and other
standards applicable to other performance plans of the Company in setting the
standards for Performance Share Awards under the Plan.

          (b)  Performance Share Awards and all rights with respect to such
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered.

          (c)  A Participant receiving a Performance Share Award shall have the
rights of a stockholder only as to shares actually received by the Participant
under the Plan and not with respect to shares subject to an Award but not
actually received by the Participant. A Participant shall be entitled to receive
a stock certificate evidencing the acquisition of shares of Common Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the agreement evidencing the Performance Share Award.

          (d)  The Board may at any time accelerate or waive any or all of the
goals, restrictions or conditions imposed under any Performance Share Award.

     9.   Restricted and Unrestricted Stock
          ---------------------------------

          (a)  The Board may grant Restricted Stock Awards entitling recipients
to acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares at their purchase price (or to require
forfeiture of such shares if purchased at no cost)

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from the recipient in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable Restricted
Period or Restricted Periods established by the Board for such Award. Conditions
for repurchase (or forfeiture) may be based on continuing employment or service
or achievement of pre-established performance or other goals and objectives.

          (b)  Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the Board,
during the applicable Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Board may determine. Any certificates issued in
respect of shares of Restricted Stock shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the Restricted Period, the Company (or such
designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.

          (c)  The Board may, in its sole discretion, grant (or sell at a
purchase price determined by the Board, which shall not be lower than 85% of
Fair Market Value on the date of sale) to Participants shares of Common Stock
free of any restrictions under the Plan ("Unrestricted Stock").

          (d)  The purchase price for each share of Restricted Stock and
Unrestricted Stock shall be determined by the Board of Directors and may not be
less than the par value of the Common Stock. Such purchase price may be paid in
the form of past services or such other lawful consideration as is determined by
the Board

          (e)  The Board may at any time accelerate the expiration of the
Restricted Period applicable to all, or any particular, outstanding shares of
Restricted Stock.

     10.  General Provisions Applicable to Awards
          ---------------------------------------

          (a)  Applicability of Rule 16b-3. Those provisions of the Plan which
               ---------------------------
make an express reference to Rule 16b-3 shall apply to the Company only at such
time as the Company's Common Stock is registered under the Exchange Act, or any
successor provision, and then only to Reporting Persons.

          (b)  Reporting Person Limitations. Notwithstanding any other provision
               ----------------------------
of the Plan, to the extent required to qualify for the exemption provided by
Rule 16b-3, (i) any Option, SAR, Performance Share Award or other similar right
related to an equity security issued under the Plan to a Reporting Person shall
not be transferable other than by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I or the Employee Retirement Income Security Act ("ERISA"), or the rules
thereunder, and shall be exercisable during the Participant's lifetime only by
the Participant or the Participant's guardian or legal representative, and (ii)
the selection of a Reporting Person as a Participant and the terms of his or her
Award shall be determined only in accordance with the applicable provisions of
Rule 16b-3.

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          (c)  Documentation. Each Award under the Plan shall be evidenced by an
               -------------
instrument delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Board (or its designee) considers necessary or
advisable. Such instruments may be in the form of agreements to be executed by
both the Company and the Participant, or certificates, letters or similar
documents, acceptance of which will evidence agreement to the terms thereof and
of this Plan.

          (d)  Board Discretion. Except as otherwise provided by the Plan, each
               ----------------
type of Award may be made alone, in addition to or in relation to any other type
of Award. The terms of each type of Award need not be identical, and the Board
need not treat Participants uniformly. Except as otherwise provided by the Plan
or a particular Award, any determination with respect to an Award may be made by
the Board at the time of award or at any time thereafter.

          (e)  Termination of Status. Subject to the provisions of Section
               ---------------------
6(b)(iv), the committee shall determine the effect on an Award of the
disability, death, retirement, authorized leave of absence or other termination
of employment or other status of a Participant and the extent to which, and the
period during which, the Participant's legal representative, guardian or
Designated  Beneficiary may exercise rights under such Award.

          (f)  Mergers, Etc.   In the event of a consolidation, merger or other
               ------------
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company, or - the board of directors of
any corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions as to outstanding Awards: (i)
provide that such Awards shall be assumed, or substantially equivalent Awards
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof) on such terms as the Board determines to be appropriate, (ii)
upon written notice to Participants, provide that all unexercised Options or
SARs will terminate immediately prior to the consummation of such transaction
unless exercised by the Participant within a specified period following the date
of such notice, (iii) in the event of an Acquisition under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the Acquisition (the
"Acquisition Price"), make or provide for a cash payment to Participants equal
to the difference between (A) the Acquisition Price times the number of shares
of Common Stock subject to outstanding Options or SARs (to the extent then
exercisable at prices not in excess of the Acquisition Price) and (B) the
aggregate exercise price of all such outstanding Options or SARs in exchange for
the termination of such Options and SARS, and (iv) provide that all or any
outstanding Awards shall become exercisable or realizable in full prior to the
effective date of such Acquisition.

          (g)  Withholding. The Participant shall pay to the Company, or make
               -----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in respect of Awards under the Plan no later than the date of the
event creating the tax liability. In the Board's discretion, and subject to such
conditions as the Board may establish, such tax obligations may be paid in whole
or in part in shares of Common Stock, including shares retained from the Award
creating the tax obligation, valued at their Fair Market Value. The

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Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.

          (h)  Foreign Nationals. Awards may be made to Participants who are
               -----------------
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Board considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.

          (i)  Amendment of Award. The Board may amend, modify or terminate any
               ------------------
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

          (j)  Cancellation and New Grant of Options. The Board of Directors
               -------------------------------------
shall have the authority to effect, at any time and from time to time, with the
consent of the affected optionees, (i) the cancellation of any or all
outstanding Options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the cancelled options or (ii) the
amendment of the terms of any and all outstanding Options under the Plan to
provide an option exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Options.

          (k)  Conditions on Delivery of Stock. The Company will not be
               -------------------------------
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan (i) until
all conditions of the Award have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (iii) if the outstanding Common Stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (iv) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Common Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Common Stock bear an appropriate legend restricting
transfer.

     11.  Miscellaneous
          -------------

          (a)  No Right To Employment or Other Status. No person shall have any
               --------------------------------------
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or service
for the Company. The Company expressly reserves the right at any time to dismiss
a Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.

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          (b)  No Rights As Stockholder. Subject to the provisions of the
               ------------------------
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the record holder thereof.

          (c)  Exclusion from Benefit Computations. No amounts payable upon
               -----------------------------------
exercise of Awards granted under the Plan shall be considered salary, wages or
compensation to Participants for purposes of determining the amount or nature of
benefits that Participants are entitled to under any insurance, retirement or
other benefit plans or programs of the Company.

          (d)  Effective Date and Term. The Plan shall become effective on April
               -----------------------
17, 1996, the date it was adopted by the Board of Directors, but no Incentive
Stock Option granted under the Plan shall become exercisable unless and until
the Plan shall have been approved by the Company's stockholders. If such
stockholder approval is not obtained within twelve months after the date of the
Board's adoption of the Plan, no Options previously granted under the Plan shall
be deemed to be Incentive Stock Options and no Incentive Stock Options shall be
granted thereafter. No Award may be made under the Plan after April 17, 2006,
but Awards previously granted may extend beyond that date.

          (e)  Amendment of Plan. The Board may amend, suspend or terminate the
               -----------------
Plan or any portion thereof at any time, provided that no amendment shall be
made without stockholder approval if such approval is necessary to comply with
any applicable tax or regulatory requirement, including any requirements for
compliance with Rule 16b-3. Amendments requiring stockholder approval shall
become effective when adopted by the Board of Directors, but no Incentive Stock
Option granted after the date of such amendment shall become exercisable (to the
extent that such amendment to the Plan was required to enable the Company to
grant such Incentive Stock Option to a particular Participant) unless and until
such amendment shall have been approved by the Company's stockholders. If such
stockholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
Participant.

          (f)  Governing Law. The provisions of the Plan shall be governed by
               -------------
and interpreted in accordance with the laws of the State of Delaware.

                                    First adopted by the Board of Directors on
                                    April 17, 1996 and by the Stockholders on
                                    September 6, 1996. First amendment adopted
                                    by the Board of Directors on May 27, 1998
                                    and by the Stockholders on July 29, 1998.
                                    Second amendment adopted by the Board of
                                    Directors on May 2, 2000 and by the
                                    Stockholders on July 28, 2000.

                                      -11-<PAGE>

                                                                   Exhibit 10.26

                      AMERICAN SUPERCONDUCTOR CORPORATION

             AMENDED AND RESTATED 1997 DIRECTOR STOCK OPTION PLAN

1.   Purpose.
     -------

     The purpose of this Amended and Restated 1997 Director Stock Option Plan
(the "Plan") of American Superconductor Corporation (the "Company") is to
encourage stock ownership in the Company by outside directors of the Company
whose continued services are considered essential to the Company's future
success and to provide them with a further incentive to remain as directors of
the Company.

2.   Administration.
     --------------

     The Board of Directors shall supervise and administer the Plan.  Grants of
stock options under the Plan and the amount and nature of the options to be
granted shall be automatic in accordance with Section 5.  However, all questions
concerning interpretation of the Plan or any options granted under it shall be
resolved by the Board of Directors and such resolution shall be final and
binding.  No director or person acting pursuant to the authority delegated by
the Board of Directors shall be liable for any action or determination relating
to or under the Plan made in good faith.

3.   Participation in the Plan.
     -------------------------

     Directors of the Company who are not full-time employees of the company or
any subsidiary of the Company ("Outside Directors") shall be eligible to receive
options under the Plan, except that Directors of the Company who are
representatives of an equity holder of the Company shall not be eligible to
receive options under the Plan.

4.   Stock Subject to the Plan.
     -------------------------

     (a)  The maximum number of shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), which may be issued under the Plan shall be
640,000 shares, subject to adjustment as provided in Section 7.

     (b)  If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares covered by the
unexercised portion of such option shall again become available for issuance
pursuant to the Plan.

     (c)  All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").

     (d)  Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
<PAGE>

5.   Terms, Conditions and Form of Options.
     -------------------------------------

     Each option granted under the Plan shall be evidenced by a written
agreement in such form as the President or the Executive Vice President,
Corporate Development, shall from time to time approve, which agreements shall
comply with and be subject to the following terms and conditions:

     (a)  Option Grant Dates and Shares Subject to Option. Options will be
          -----------------------------------------------
granted under the Plan as follows:

          (i)    Initial Grants to Current Outside Directors. Provided that any
                 -------------------------------------------
stock options previously granted to a person serving as an Outside Director
under another director stock option plan of the Company are vested completely or
that such Outside Director has not yet been granted an option, an option to
purchase 40,000 shares of Common Stock shall be granted automatically to each
person serving as an Outside Director of the Company upon the approval of the
Plan by the stockholders of the Company. For persons serving as Outside
Directors whose stock options previously granted under another director stock
option plan of the Company have not vested completely as of the date of the
approval of the Plan by the stockholders of the Company, an option to purchase
40,000 shares of Common Stock shall be granted automatically on the first
business day following the date that such stock options are vested completely,
provided that such person is serving as an Outside Director as of such date.

          (ii)   Initial Grants to Future Outside Directors. An option to
                 ------------------------------------------
purchase 40,000 shares of Common Stock shall be granted automatically to each
Outside Director first elected to the Board of Directors after the date of the
approval of the Plan by the stockholders of the Company, upon the date of his or
her initial election to the Board of Directors.

          (iii)  Subsequent Grants to Current Outside Directors. Provided that
                 ----------------------------------------------
any stock options previously granted under the Plan pursuant to subsection (i)
above to a person serving as an Outside Director are vested completely, an
option to purchase 40,000 shares of Common Stock shall be granted automatically
to each person serving as an Outside Director of the Company upon approval of
this subsection by the stockholders of the Company. For persons serving as
Outside Directors whose stock options previously granted under the Plan have not
vested completely as of the date of approval of this subsection by the
stockholders of the Company, an option to purchase 40,000 shares of Common Stock
shall be granted automatically on the first business day following the date that
such stock options are vested completely, provided that such person is serving
as an Outside Director as of such date.

     (b)  Option Exercise Price. The option exercise price per share for each
          ---------------------
option granted under the Plan shall be equal to the fair market value per share
of Common Stock on the date of grant, which shall be determined as follows: (i)
if the Common Stock is listed on the Nasdaq National Market or another
nationally recognized exchange or trading system as of the date on which a
determination of fair market value is to be made, the fair market value per
share shall be deemed to be the last reported sale price per share of Common
Stock thereon on such date (or, if no such price is reported on such date, such
price on the nearest preceding date on which such a price is reported); and (ii)
if the Common Stock is not listed on the Nasdaq National Market or another
nationally recognized exchange or trading system as of the date on

                                      -2-
<PAGE>

which a determination of fair market value is to be made, the fair market value
per share shall be as determined by the Board of Directors.

     (c)  Transferability of Options. Except as the Board of Directors may
          --------------------------
otherwise determine, options shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the optionee, shall be exercisable only by
the optionee. References to a optionee, to the extent relevant in the context,
shall include references to authorized transferees, if any.

     (d)  Vesting Period.
          --------------

          (i)    General. Each option granted under the Plan shall become
                 -------
exercisable in equal annual installments over the four year period following the
date of grant.

          (ii)   Acceleration Upon An Acquisition Event. Notwithstanding the
                 --------------------------------------
foregoing, each outstanding option granted under the Plan shall immediately
become exercisable in full in the event an Acquisition Event (as defined in
Section 8) of the Company occurs.

     (e)  Termination. Each option shall terminate, and may no longer be
          -----------
exercised, on the earlier of the (i) the date ten years after the date of grant
or (ii) the date 60 days after the optionee ceases to serve as a director of the
Company for any reason, whether by death, resignation, removal or otherwise.

     (f)  Exercise Procedure. Options may be exercised only by written notice to
          ------------------
the Company at its principal office accompanied by (i) payment in cash or by
certified or bank check of the full consideration for the shares as to which
they are exercised or (ii) an irrevocable undertaking, in form and substance
satisfactory to the Company, by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price or (iii) delivery of irrevocable
instructions, in form and substance satisfactory to the Company, to a broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price.

     (g)  Exercise by Representative Following Death of Director. An optionee,
          ------------------------------------------------------
by written notice to the Company, may designate one or more persons (and from
time to time change such designation), including his or her legal
representative, who, by reason of the optionee's death, shall acquire the right
to exercise all or a portion of the option. If the person or persons so
designated wish to exercise any portion of the option, they must do so within
the term of the option as provided herein. Any exercise by a representative
shall be subject to the provisions of the Plan.

6.   Limitation of Rights.
     --------------------

     (a)  No Right to Continue as a Director. Neither the Plan, nor the granting
          ----------------------------------
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
optionee shall be entitled to continue as a director for any period of time.

                                      -3-
<PAGE>

     (b)  No Stockholder Rights for Options. An optionee shall have no rights as
          ---------------------------------
a stockholder with respect to the shares covered by his or her option until the
date of the issuance to him or her of a stock certificate therefor, and no
adjustment will be made for dividends or other rights (except as provided in
Section 7) for which the record date is prior to the date such certificate is
issued. Notwithstanding the foregoing, in the event the Company effects a split
of the Common Stock by means of a stock dividend, and the distribution date
(i.e., the date on which the closing market price of the Common Stock on a stock
exchange or trading system is adjusted to reflect the split) is subsequent to
the record date for such stock dividend, an optionee who exercises an option
between the close of business on such record date and the close of business on
such distribution date shall be entitled to receive the stock dividend with
respect to the shares of Common Stock acquired upon such option exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on such record date.

     (c)  Compliance with Securities Laws.  Each 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 to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition to, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors.

7.   Adjustment to Common Stock. In the event of any stock split, stock
     --------------------------
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan and (ii) the number and class of security and exercise price per
share subject to each outstanding option shall be appropriately adjusted by the
Company to the extent the Board shall determine, in good faith, that such an
adjustment is necessary and appropriate. No fractional shares will be issued
under the Plan on account of any such adjustments. If this Section 7 applies and
Section 8 also applies to any event, Section 8 shall be applicable to such event
and this Section 7 shall not be applicable.

     Notwithstanding the foregoing, in the event the Company effects a split of
the Common Stock by means of a stock dividend, and the distribution date (i.e.,
the date on which the closing market price of the Common Stock on a stock
exchange or trading system is adjusted to reflect the split) is subsequent to
the record date for such stock dividend, an optionee who exercises an option
between the close of business on such record date and the close of business on
such distribution date shall be entitled to receive the stock dividend with
respect to the shares of Common Stock acquired upon such option exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on such record date.

8.   Acquisition Events.
     -------------------

     Consequences of Acquisition Events.  Upon the occurrence of an Acquisition
     ----------------------------------
Event (as defined below), or the execution by the Company of any agreement with
respect to an

                                      -4-
<PAGE>

Acquisition Event, the Board shall take any one or more of the following actions
with respect to then outstanding options: (i) provide that outstanding options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or succeeding corporation (or an affiliate thereof), provided that any such
options substituted for such options shall satisfy, in the determination of the
Board, the requirements of Section 424(a) of the Internal Revenue Code of 1986,
as amended; (ii) upon written notice to the optionees, provide that all then
unexercised options will become exercisable in full as of a specified time (the
"Acceleration Time") prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the optionees between the Acceleration Time and the
consummation of such Acquisition Event; and (iii) in the event of an Acquisition
Event under the terms of which holders of Common Stock will receive upon
consummation thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price"), provide that all
outstanding options shall terminate upon consummation of such Acquisition Event
and each optionee shall receive, in exchange therefor, a cash payment equal to
the amount (if any) by which (A) the Acquisition Price multiplied by the number
of shares of Common Stock subject to such outstanding options (whether or not
then exercisable), exceeds (B) the aggregate exercise price of such options.

     An "Acquisition Event" shall mean: (x) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (y) any sale of all or substantially all of the assets
of the Company; or (z) the complete liquidation of the Company.

9.   Modification, Extension and Renewal of Options.
     ----------------------------------------------

     The Board of Directors shall have the power to modify or amend outstanding
options; provided, however, that no modification or amendment may (i) have the
effect of altering or impairing any rights or obligations of any option
previously granted without the consent of the optionee, or (ii) modify the
number of shares of Common Stock subject to the option (except as provided in
Section 7).

10.  Termination and Amendment of the Plan.
     -------------------------------------

     The Board of Directors may suspend, terminate or discontinue the Plan or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company, no amendment may (i) increase the number of
shares subject to the Plan (except as provided in Section 7), or (ii) effect any
action which requires approval of the stockholders pursuant to the rules or
requirements of the Nasdaq National Market or any other exchange on which the
Common Stock of the Company is listed.

11.  Notice.
     ------
     Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.

                                      -5-
<PAGE>

12.  Governing Law.
     -------------

     The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.

13.  Stockholder Approval.
     --------------------

     The Plan is conditional upon stockholder approval of the Plan within one
year from its date of adoption by the Board of Directors, and no option may be
granted under the Plan until such stockholder approval is obtained.

                                    First adopted by the Board of Directors on
                                    July 24, 1997 and approved by the
                                    shareholders on September 5, 1997. First
                                    amendment adopted by the Board of Directors
                                    on May 2, 2000 and by the stockholders on
                                    July 28, 2000.

                                      -6-

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