EXHIBIT
4.2


 


                THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE
FOREGOING LAWS.


 


                SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS
WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN ON SEPTEMBER 26, 2007
(“EXPIRATION DATE”).


 


No. ___________


 


 


CONDUCTUS,
INC.


 


WARRANT
TO PURCHASE 712,500 SHARES OF


COMMON
STOCK, PAR VALUE $0.0001 PER SHARE


 


                For VALUE RECEIVED, Special Situations Fund III, L.P.
(“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from Conductus, Inc., a Delaware corporation (“Company”), at any time
after September 26, 2002 and not later than 5:00 P.M., Eastern time, on the
Expiration Date, at an exercise price per share equal to $2.75 (the exercise
price in effect being herein called the “Warrant Price”), 712,500 shares
(“Warrant Shares”) of the Company’s Common Stock, par value $0.0001 per share
(“Common Stock”).  The number of Warrant
Shares purchasable upon exercise of this Warrant and the Warrant Price shall be
subject to adjustment from time to time as described herein.


 


                Section 1.               Registration.  The Company shall maintain books for the
transfer and registration of the Warrant. 
Upon the initial issuance of this Warrant, the Company shall issue and
register the Warrant in the name of the Warrantholder.


 


                Section 2.               Transfers.  As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (“Securities Act”), or an exemption from
such registration.  Subject to such restrictions,
the Company shall transfer this Warrant from time to time upon the books to be
maintained by the Company for that purpose, upon surrender thereof for transfer
properly endorsed or  accompanied by
appropriate instructions for transfer and such other documents as may be
reasonably required by the Company, including, if required by the Company, an
opinion of its counsel to the effect that such transfer is exempt from the
registration requirements of the Securities Act of 1933, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.


 

















 


 


                Section 3.               Exercise
of Warrant.  Subject to the
provisions hereof, the Warrantholder may exercise this Warrant in whole or in
part at any time upon surrender of the Warrant, together with delivery of the
duly executed Warrant exercise form attached hereto as Appendix A (the
“Exercise Agreement”) and payment by cash, certified check or wire transfer of
funds for the aggregate Warrant Price for that number of Warrant Shares then
being purchased, to the Company during normal business hours on any business
day at the Company’s principal executive offices (or such other office or
agency of the Company as it may designate by notice to the holder hereof).  The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder’s designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered (or evidence of loss, theft or
destruction thereof and security or indemnity satisfactory to the Company), the
Warrant Price shall have been paid and the completed Exercise Agreement shall
have been delivered.  Certificates for
the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding three (3) business days, after this
Warrant shall have been so exercised. 
The certificates so delivered shall be in such denominations as may be
requested by the holder hereof and shall be registered in the name of such
holder or such other name as shall be designated by such holder.  If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised. 
As used herein, “business day” means a day, other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of
business.  Each exercise hereof shall
constitute the re-affirmation by the Warrantholder that the representations and
warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 of the
Purchase Agreement (as defined below) are true and correct in all material
respects with respect to the Warrantholder as of the time of such exercise.


 


                Section 4.               Compliance
with the Securities Act of 1933. The Company may cause the legend set forth
on the first page of this Warrant to be set forth on each Warrant or similar
legend on any security issued or issuable upon exercise of this Warrant, unless
counsel for the Company is of the opinion as to any such security that such
legend is unnecessary.


 


                Section 5.               Payment
of Taxes.  The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrant Shares
issuable upon the exercise of the Warrant; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder of this
Warrant in respect of which such shares are issued, and in such case, the
Company shall not be required to issue or deliver any certificate for Warrant
Shares or any Warrant until the person requesting the same has paid to the Company
the amount of such tax or has established to the Company’s reasonable
satisfaction that such tax has been paid. 
The holder shall be responsible for income taxes due under federal,
state or other law, if any such tax is due.


 


 


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                Section 6.               Mutilated
or Missing Warrants.  In case this
Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue
in exchange and substitution of and upon cancellation of the mutilated Warrant,
or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction of the Warrant, and with respect to a lost,
stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto,
if requested by the Company.


 


                Section 7.               Reservation
of Common Stock.  The Company hereby
represents and warrants that there have been reserved, and the Company shall at
all applicable times keep reserved until issued (if necessary) as contemplated
by this Section 7, out of the authorized and unissued shares of Common Stock,
sufficient shares to provide for the exercise of the rights of purchase
represented by this Warrant.  The
Company agrees that all Warrant Shares issued upon due exercise of the Warrant
shall be, at the time of delivery of the certificates for such Warrant Shares,
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock of the Company.


 


                Section 8.               Adjustments.  Subject and pursuant to the provisions of
this Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.


 


                                (a)           If
the Company shall, at any time or from time to time while this Warrant is
outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares of Common Stock into
a smaller number of shares or issue by reclassification of its outstanding
shares of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter
exercising the Warrant shall be entitled to receive the number of shares of
Common Stock or other capital stock which the Warrantholder would have received
if the Warrant had been exercised immediately prior to such event upon payment
of a Warrant Price that has been adjusted to reflect a fair allocation of the
economics of such event to the Warrantholder. 
Such adjustments shall be made successively whenever any event listed
above shall occur.


 


                                (b)           If
any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation in
which the Company is not the survivor, or sale, transfer or other disposition
of all or substantially all of the Company’s assets to another corporation
shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such 


 


 


-3-

















 


 


shares of stock,
securities or assets as would have been issuable or payable with respect to or
in exchange for a number of Warrant Shares equal to the number of Warrant
Shares immediately theretofore issuable upon exercise of the Warrant, had such
reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of each Warrantholder to
the end that the provisions hereof (including, without limitation, provision
for adjustment of the Warrant Price) shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any shares of stock, securities
or properties thereafter deliverable upon the exercise thereof.  The Company shall not effect any such
consolidation, merger, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger, or the
corporation purchasing or otherwise acquiring such assets or other appropriate
corporation or entity shall assume the obligation to deliver to the holder of
the Warrant such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to purchase, and the
other obligations under this Warrant. 
The provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers
or other dispositions.


 


                                (c)           In
case the Company shall fix a payment date for the making of a distribution to
all holders of Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness or assets (other than cash dividends
or cash distributions payable out of consolidated earnings or earned surplus or
dividends or distributions referred to in Section 8(a)), or subscription rights
or warrants, the Warrant Price to be in effect after such payment date shall be
determined by multiplying the Warrant Price in effect immediately prior to such
payment date by a fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Market Price (as defined
below) per share of Common Stock immediately prior to such payment date, less
the fair market value (as determined by the Company’s Board of Directors in
good faith) of said assets or evidences of indebtedness so distributed, or of
such subscription rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding multiplied by such Market
Price per share of Common Stock immediately prior to such payment date.  “Market Price” as of a particular date (the
“Valuation Date”) shall mean the following: (a) if the Common Stock is then
listed on a national stock exchange, the closing sale price of one share of
Common Stock on such exchange on the last trading day prior to the Valuation
Date; (b) if the Common Stock is then quoted on The NASDAQ Stock Market, Inc.
(“Nasdaq”), the closing sale price of one share of Common Stock on Nasdaq on
the last trading day prior to the Valuation Date or, if no such closing sale
price is available, the average of the high bid and the low asked price quoted
on Nasdaq on the last trading day prior to the Valuation Date; or (c) if the
Common Stock is not then listed on a national stock exchange or quoted on
Nasdaq, the Fair Market Value of one share of Common Stock as of the Valuation
Date, shall be determined in good faith by the Board of Directors of the
Company and the Warrantholder.  The
Board of Directors of the Company shall respond promptly, in writing, to an
inquiry by the Warrantholder prior to the exercise hereunder as to the Market
Value of a share of Common Stock as determined by the Board of Directors of the



 


 


-4-

















 


 


Company.  In the event that the Board of Directors of
the Company and the Warrantholder are unable to agree upon the Market Value in
respect of subpart (c) hereof, the Company and the Warrantholder shall jointly
select an appraiser, who is experienced in such matters.  The decision of such appraiser shall be
final and conclusive, and the cost of such appraiser shall be borne evenly by
the Company and the Warrantholder.  Such
adjustment shall be made successively whenever such a payment date is fixed.


 


                                (d)           In
the event that, as a result of an adjustment made pursuant to this Section 8,
the holder of this Warrant shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Warrant.


 


                Section 9.               Fractional
Interest.  The Company shall not be
required to issue fractions of Warrant Shares upon the exercise of the
Warrant.  If any fractional share of
Common Stock would, except for the provisions of the first sentence of this Section
9, be delivered upon such exercise, the Company, in lieu of delivering such
fractional share, shall pay to the exercising holder of this Warrant an amount
in cash equal to the Fair Market Value of such fractional share of Common Stock
on the date of exercise.  As used in
this Warrant, “Fair Market Value” of a share of Common Stock as of a particular
date (the “Valuation Date”) shall mean the following: (a) if the Common Stock
is then listed on a national stock exchange, the closing sale price of one share
of Common Stock on such exchange on the last trading day prior to the Valuation
Date; (b) if the Common Stock is then quoted on Nasdaq, the closing sale price
of one share of Common Stock on Nasdaq on the last trading day prior to the
Valuation Date or, if no such closing sale price is available, the average of
the high bid and the low sales price quoted on Nasdaq on the last trading day
prior to the Valuation Date; or (c) if the Common Stock is not then listed on a
national stock exchange or quoted on Nasdaq, the Fair Market Value of one share
of Common Stock as of the Valuation Date, shall be determined in good faith by
the Board of Directors of the Company.


 


                Section 10.             Extension
of Expiration Date.  If the Company
fails to cause any Registration Statement covering Registrable Securities
(unless otherwise defined herein, capitalized terms are as defined in the
Registration Rights Agreement dated of even date herewith (the “Registration
Rights Agreement”)) to be declared effective prior to the applicable dates set
forth therein, or if any of the events specified in clause (B) of Section
2(c)(i) of the Registration Rights Agreement occurs, and the Blackout Period
(whether alone, or in combination with any other Blackout Period) continues for
more than 60 days in any 12 month period, or for more than a total of 90 days,
then the Expiration Date of this Warrant shall be extended one day for each day
beyond the 60-day or 90-day limits, as the case may be, that the Blackout
Period continues.


 


                Section 11.             Benefits.  Nothing in this Warrant shall be construed
to give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, 


 


 


-5-

















 


 


remedy or claim, it being
agreed that this Warrant shall be for the sole and exclusive benefit of the
Company and the Warrantholder.


 


                Section 12.             Notices
to Warrantholder.  Upon the
happening of any event requiring an adjustment of the Warrant Price, the
Company shall promptly give written notice thereof to the Warrantholder at the
address appearing in the records of the Company, stating the adjusted Warrant
Price and the adjusted number of Warrant Shares resulting from such event and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. 
Failure to give such notice to the Warrantholder or any defect therein
shall not affect the legality or validity of the subject adjustment.


 


                Section 13.             Identity
of Transfer Agent.  The Transfer
Agent for the Common Stock is EquiServe. 
Upon the appointment of any subsequent transfer agent for the Common
Stock or other shares of the Company’s capital stock issuable upon the exercise
of the rights of purchase represented by the Warrant, the Company will mail to
the Warrantholder a statement setting forth the name and address of such
transfer agent.


 


                Section 14.             Notices.  Unless otherwise provided, any notice
required or permitted under this Warrant shall be given in writing and shall be
deemed effectively given as hereinafter described (i) if given by personal
delivery, then such notice shall be deemed given upon such delivery, (ii) if
given by telex or telecopier, then such notice shall be deemed given upon
receipt of confirmation of complete transmittal, (iii) if given by mail, then
such notice shall be deemed given upon receipt of such notice by the recipient,
and (iv) if given by an internationally recognized overnight air courier, then
such notice shall be deemed given upon delivery by such carrier.  All notices shall be addressed as follows:
(i) if to the Warrantholder, at its address as set forth in the Company’s books
and records and, if to the Company, at the address as follows, or at such other
address as the Warrantholder or the Company may designate by ten days’ advance
written notice to the other:


 


                                                If to the Company:


 


Conductus, Inc.


969 W. Maude Avenue


Sunnyvale, California 94085


Attention:  Ron Wilderink


Fax:  (408) 523-9999


 


                                                With a copy to:


 


Orrick, Herrington &
Sutcliffe LLP


400 Sansome Street


San Francisco, California
94111-3143


Attention:  Richard S. Grey, Esq.


Fax:  (415) 773-5759


 


 


 


-6-

















 


 


                Section 15.             Registration
Rights.  The initial holder of this
Warrant is entitled to the benefit of certain registration rights with respect
to the shares of Common Stock issuable upon the exercise of this Warrant as
provided in the Registration Rights Agreement, and any subsequent holder hereof
may be entitled to such rights.


 


                Section 16.             
Successors.  All the covenants and
provisions hereof by or for the benefit of the Warrantholder shall bind and
inure to the benefit of its respective successors and assigns hereunder.


 


                Section 17.             Governing Law.  This Warrant shall be governed by, and construed
in accordance with, the internal laws of the State of New York, without
reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant, the Warrantholder,
each irrevocably submits to the exclusive jurisdiction of the courts of the
State of New York located in New York County and the United States District
Court for the Southern District of New York for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Warrant and
the transactions contemplated hereby. 
Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant,
the Warrantholder, each irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court.  The Company and, by accepting
this Warrant, the Warrantholder, each irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.


 


                Section 18.             Call Provision.  Notwithstanding any other provision
contained herein to the contrary, in the event that the closing bid price of a
share of Common Stock as traded on the Nasdaq (or such other exchange or stock
market on which the Common Stock may then be listed or quoted) exceeds $4.75
(appropriately adjusted for (A) any stock split, reverse stock split, stock
dividend or other reclassification or combination of the Common Stock occurring
after the date hereof or (B) the substitution of this Warrant for a warrant for
securities of an acquiring or surviving corporation pursuant to any merger or
acquisition occurring after the date hereof) for twenty (20) consecutive
trading sessions and all of the shares of Common Stock issuable hereunder
either (i) are registered pursuant to an effective Registration Statement (as
defined in the Registration Rights Agreement) which is available for sales of
such shares of Common Stock or (ii) no longer constitute Registrable Securities
(as defined in the Registration Rights Agreement), the Company, upon thirty
(30) days prior written notice (the “Notice Period”) following such twenty (20)
day period, to the Warrantholder, may call this Warrant, in whole but not in
part, at a redemption price equal to $0.01 per share of Common Stock then
purchasable pursuant to this Warrant; provided, however, that the Company
simultaneously redeems all Company Warrants (as defined in Section 20 below) on
the same terms.  Notwithstanding any 


 


 


-7-

















 


 


such notice by the Company, the Warrantholder shall have the right to
exercise this Warrant prior to the end of the Notice Period.


 


                Section 19.             No Rights as Stockholder.  Prior to the exercise of this Warrant, the
Warrantholder shall not have or exercise any rights as a stockholder of the
Company by virtue of its ownership of this Warrant.


 


                Section 20.             Amendment; Waiver.  This Warrant is one of a series of Warrants
of like tenor issued by the Company pursuant to one of the Purchase Agreements,
dated as of March 8, 2002 (the “Purchase Agreements”), among the Company and
the original holders of Warrants listed in Part A of Schedule 1 hereto
and between or among the Company and other original holders of Warrants listed
in Part B or Schedule 2 hereto (collectively, the “Company
Warrants”).  Any term of this Warrant
may be amended or waived (including the adjustment provisions included in
Section 8 of this Warrant) upon the written consent of the Company and the holders
of Company Warrants representing at least 50% of the number of shares of Common
Stock for which the outstanding Company Warrants remain exercisable (the
“Majority Holders”); provided, that (x) any such amendment or waiver
must apply to all Company Warrants; and (y) the number of Warrant Shares
subject to this Warrant, the Warrant Price and the expiration date of this
Warrant may not be amended, and the right to exercise this Warrant may not be
altered or waived, without the written consent of the Warrantholder.


 


                Section 21.             Section Headings.  The section heading in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.


 


 


-8-

















 


 


                IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed, as of the 26th day of March, 2002.


 


	
   

  	
  CONDUCTUS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RON WILDERINK

  
	
   

  	
  Name:

  	
  Ron Wilderink

  
	
   

  	
  Title:

  	
  Vice President of
  Finance and Chief

  Financial Officer

  
	
   

  	
   

  



 


 

















 


 


APPENDIX A


CONDUCTUS, INC.


WARRANT EXERCISE FORM


 


To: Conductus,
Inc.


 


                The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant (“Warrant”) for, and to
purchase thereunder by the payment of the Warrant Price and surrender of the
Warrant, _______________ shares of Common Stock (“Warrant Shares”) provided for
therein, and requests that certificates for the Warrant Shares be issued as
follows:


 


 


	
   

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Federal Tax ID or
  Social Security No.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  and delivered by

  	
  € certified mail to the above address,
  or

  	
   

  
	
   

  	
  € electronically (provide DWAC 

  	
   

  
	
  Instructions:

  	
   

  	
  ), or

  
	
   

  	
  € other (specify:

  	
   

  
	
   

  	
   

  	
  ).

  



 


and, if the number of
Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of
the Warrant, that a new Warrant for the balance of the Warrant Shares
purchasable upon exercise of this Warrant be registered in the name of the
undersigned Warrantholder or the undersigned’s Assignee as below indicated and
delivered to the address stated below.


 


 


	
  Dated: 

  	
   

  	
  ,

  	
   

  
	
   

  	
   

  
	
  Note:  The signature must correspond with

  	
  Signature:

  	
   

  
	
  the name of the
  registered holder as written

  	
   

  	
   

  
	
  on the first page of
  the Warrant in every

  	
   

  	
   

  
	
  particular, without
  alteration or enlargement

  	
   

  	
  Name (please print)

  
	
  or any change whatever,
  unless the Warrant

  	
   

  	
   

  
	
  has been assigned.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Federal Identification
  or

  
	
   

  	
   

  	
  Social Security No.

  



 

















 


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Assignee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


 

















 


 


SCHEDULE 1


ORIGINAL WARRANTHOLDERS


 


Part A


 


Special Situations Fund
III, L.P.


Special Situations Cayman
Fund, L.P.


Special Situations
Private Equity Fund, L.P.


Special Situations
Technology Fund, L.P.


 


Part B


 


Micro Cap Partners, L.P.


Microcapital Fund LP


Microcapital Fund Ltd.